Filed Pursuant to Rule 424(b)(3)
Registration File No. 333-37198
PROXY STATEMENT/
RECONFIRMATION OFFERING
PROSPECTUS
UNITED MANAGEMENT, INC.
288,420 SHARES OF COMMON STOCK
$.40 PER SHARE
The boards of directors of United Management, Inc. and RRUN Ventures,
Inc. have approved the merger of United and RRUN. Under the terms of the merger,
based on the number of securities of RRUN that are expected to be outstanding at
the closing of the merger, the holders of RRUN common stock and preferred stock
will receive approximately 305,439 shares of United common stock. After giving
effect to the merger, it is expected that RRUN shareholders will own
approximately 64% of United's issued and outstanding common stock. There is
currently no market for United common stock.
The merger cannot be completed unless United shareholders approve the
merger, the merger agreement and the issuance of shares of United common stock
to be delivered in connection with the merger, and RRUN shareholders approve the
merger and the merger agreement. The board of directors of United has called a
special meeting of United shareholders to be held on August 17, 2001 to vote on
these matters. United shareholders that own shares of United common stock as of
the record date, which is the close of business on July 1, 2001, may vote at the
United annual meeting or by proxy. RRUN shareholders will vote on the merger by
written consent. Holders of shares of RRUN common stock at the close of business
on the date the first written consent is given are entitled to submit written
consents.
THE BOARDS OF DIRECTORS OF UNITED AND RRUN ARE FURNISHING THIS DOCUMENT
TO YOU TO PROVIDE YOU WITH IMPORTANT INFORMATION ABOUT THE MERGER AND OTHER
MATTERS. IN ADDITION TO FURNISHING YOU WITH THIS IMPORTANT INFORMATION, THIS
DOCUMENT ALSO CONSTITUTES NOTICE TO THE SHAREHOLDERS OF RRUN OF RIGHTS TO
DISSENT IN ACCORDANCE WITH THE NEVADA REVISED STATUTES. Holders of RRUN shares
who are not in favor of the merger and who wish to assert appraisal rights must
comply with the relevant procedures detailed under Nevada law, which are set
forth in the statutory provisions reproduced in Appendix C to this proxy
statement/ prospectus. United shareholders are not entitled to appraisal rights
under the Nevada General Corporation Law.
THE PROPOSED MERGER IS A COMPLEX TRANSACTION. UNITED AND RRUN STRONGLY
URGE YOU TO READ AND CONSIDER THIS PROXY STATEMENT/ PROSPECTUS IN ITS ENTIRETY,
INCLUDING THE MATTERS REFERRED TO UNDER "RISK FACTORS" BEGINNING ON PAGE 12.
/s/ Christine Cerisse /s/ Ray Hawkins
President and Chief Executive Officer of President and Chief Executive of
United Management, Inc. RRUN Ventures, Inc.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE UNITED COMMON STOCK TO BE ISSUED
UNDER THIS PROXY STATEMENT/PROSPECTUS OR DETERMINED THE ADEQUACY OR ACCURACY OF
THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This proxy statement/prospectus/information statement is dated August
7, 2001, and was first mailed to shareholders on or about August 7, 2001.
RECONFIRMATION OFFERING
This prospectus also relates to the reconfirmation offering required by
Rule 419 of Regulation C under the Securities Act of 1933 concerning 288,420
shares of common stock, $.0001 par value of United Management, Inc. The shares
were initially sold in an initial public offering of 288,420 shares of common
stock, which was completed in December 2000. In December 2000, we executed an
agreement with RRUN Ventures, Inc., a Nevada corporation, and its shareholders
to acquire all of RRUN's issued and outstanding shares of capital stock in
exchange for 305,439 shares of our common stock. This prospectus is being
furnished to investors in the offering so they may consider reconfirming their
investment as a result of the proposed acquisition.
Prior to the offering and this reconfirmation offering, there has been
no market for common stock and we cannot assure you that a market will exist
after the proposed acquisition is completed.
-------------------------
The offering and the reconfirmation offering are being conducted under
Rule 419 of Regulation C under the Securities Act.
-------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. It is illegal for anyone to tell you
otherwise.
The offering and the reconfirmation offering involve a speculative
investment, a high degree of risk, and suitable only for persons who can afford
the loss of their entire investment. See "Risk Factors" beginning on page 5.
-------------------------
Offering Information
---------------------------- ------------- -------------------- ------------- -----------------
Number of shares sold in Price per Gross proceeds to Offering
initial public offering share United Management expenses Net proceeds
---------------------------- ------------- -------------------- ------------- ------------------
288,420 $.40 $115,368 $10,000 $105,368
---------------------------- ------------- -------------------- ------------- ------------------
TABLE OF CONTENTS
Page
Notice of Special Meeting of Shareholders to be Held on
August 17, 2001..............................................................4
Where You Can Find More Information...........................................6
Questions and Answers about the Merger........................................7
Prospectus Summary...........................................................10
Risk Factors.................................................................12
Your Rights and Substantive Protection Under Rule 419
Deposit of Offering Proceeds and Securities.................................15
Merger ......................................................................16
Dilution ....................................................................19
Use of Proceeds..............................................................20
Capitalization...............................................................22
The United Special Meeting...................................................23
RRUN Solicitation of Written Consents........................................25
Appraisal Rights.............................................................26
Plan of Operation............................................................29
Description of Business......................................................35
Principal Shareholders.......................................................48
Management...................................................................50
Executive Compensation.......................................................52
Certain Relationships and Related Transactions...............................53
Legal Proceedings............................................................53
Market for our Common Stock..................................................53
Description of Securities....................................................55
Shares Eligible for Future Resale............................................56
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Reports to Stockholders......................................................56
Legal Matters................................................................56
Experts .....................................................................56
Indemnification of Officers and Directors....................................56
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.........................................57
Signatures..................................................................II-4
Financial Statements.........................................................F-1
Appendix A -- Proxy Card
Appendix B -- Form of RRUN Written Consent
Appendix C -- Sections 1300-1305 and 1312 of the Nevada Revised Statutes:
Dissenter's Rights
Appendix D -- Definitive Proxy Statement for the November 24, 2000 Annual
Meeting
You should rely only on the information contained in this prospectus.
We have not authorized anyone to provide you with information different from
that contained in this prospectus. We are offering to sell, and seeking offers
to buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock.
3
UNITED MANAGEMENT, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 17, 2001
TO THE SHAREHOLDERS OF UNITED MANAGEMENT, INC.:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of United
Management, Inc., a Nevada corporation, will be held on August 17, 2001 at 9:00
a.m. local time at United's principal executive offices, Suite 104, 1456 St.
Paul St., Kelowna, British Columbia, Canada, to consider and vote upon the
following proposals:
o To approve the Agreement and Plan of Reorganization by and
among United, and RRUN Ventures, Inc., a Nevada corporation,
to approve the merger of United and RRUN, and to approve the
issuance of shares of United common stock to RRUN shareholders
in the merger. After the merger, RRUN will become a
wholly-owned subsidiary of United. A copy of the merger
agreement is available by request from United at 250-868-8177
or at www.sec.gov.
The foregoing proposal is more fully described in the accompanying
Proxy Statement/Prospectus. The United board of directors unanimously recommends
that you vote in favor of the proposal listed above.
The Board of Directors has fixed the close of business on July 1, 2001
as the record date for the determination of shareholders entitled to notice of
and to vote at this special meeting of shareholders and at any adjournments or
postponements thereof.
By Order of the Board of Directors
/s/ Christine Cerisse
President
TO ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE UNITED MEETING,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE
POSTAGE-PAID ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE UNITED
MEETING. YOU CAN REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED.
4
ABOUT THIS PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT
You should rely only on the information contained or incorporated by
reference in this document to vote or consent with respect to the matters
submitted to you. Neither United nor RRUN has authorized anyone to provide you
with information that is different from what is contained in this document. This
proxy statement/prospectus is dated August 7, 2001. You should not assume that
the information contained in this proxy statement/prospectus is accurate as of
any date other than that date, and the issuance of United common stock in the
merger will not create any implication to the contrary. United provided the
information concerning United. RRUN provided the information concerning RRUN.
5
WHERE YOU CAN FIND MORE INFORMATION
We are a reporting company, and are subject to the reporting
requirements of the Exchange Act. We voluntarily filed a Form 10-SB on September
3, 1999. We have filed a registration statement with the SEC on form SB-2 to
register the offer and sale of the shares. This prospectus is part of that
registration statement, and, as permitted by the SEC's rules, does not contain
all of the information in the registration statement. For further information
about us and the shares offered under this prospectus, you may refer to the
registration statement and to the exhibits and schedules filed as a part of the
registration statement. You can review the registration statement and its
exhibits and schedules at the public reference facility maintained by the SEC at
Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. The registration statement is also available electronically on
the World Wide Web at http://www.sec.gov.
IF YOU ARE A UNITED OR RRUN SHAREHOLDER AND WOULD LIKE TO REQUEST
DOCUMENTS FROM UNITED, PLEASE DO SO BY AUGUST 12, 2001 TO RECEIVE THEM BEFORE
THE ANNUAL MEETING.
6
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. WHEN IS IT EXPECTED THAT THE MERGER WILL BE COMPLETED?
A: United and RRUN are working toward completing the merger as quickly as
possible, and hope to complete the merger shortly following the United
special meeting to be held on August 17, 2001. In order to complete the
merger, the shareholders of both United and RRUN must approve the
merger. Following approval by the United and RRUN shareholders, the
merger will be complete when all of the other conditions to completion
of the merger are satisfied or waived. The merger will become effective
when an article of merger is filed with the Secretary of State of
Nevada.
Q. AS A RRUN SHAREHOLDER, WHAT WILL I RECEIVE IN THE MERGER?
A: Based on the number of securities of RRUN that are expected to be
outstanding at the closing of the merger, you will receive
approximately 0.05 of a share of United common stock for each share of
RRUN stock that you own, subject to some adjustments provided for in
the merger agreement. For example, if you own 1,000 shares of RRUN
stock, you will receive approximately 50 shares of United common stock.
You will receive only whole shares.
Q. WHAT WILL HAPPEN TO RRUN'S OUTSTANDING OPTIONS?
A: In accordance with the terms of the merger agreement, each option
outstanding as of the date of the completion of the merger will be
assumed by United, which is changing its name to RRUN Ventures, Inc.
and automatically will become options to purchase shares of "new RRUN"
common stock on the same terms and conditions as the "old RRUN"
options.
Q. AS A UNITED SHAREHOLDER, WILL I RECEIVE ADDITIONAL SHARES OF UNITED
COMMON STOCK IN THE MERGER?
A: No, you will continue to hold the same number of shares of United
common stock after the merger. Shares of United common stock will be
issued only to RRUN shareholders in the merger. The merger will result
in United shareholders holding a smaller percentage of the combined
company's stock than the percentage of United stock they currently
hold. Assuming 100% of the investors in the offering reconfirm their
investment, after the merger, it is expected that pre-merger United
shareholders will own approximately 35.6% of the outstanding shares of
United common stock on a fully diluted basis.
Q. HAS SOMEONE DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF THE
UNITED AND RRUN SHAREHOLDERS?
A: Yes, the boards of directors of United and RRUN have determined that
the merger is in the best interests of their respective shareholders.
The board of directors of each of United
7
and RRUN has approved the merger and the merger agreement, and the
board of directors of United has approved the issuance of United common
stock in the merger.
Q. WILL UNITED SHAREHOLDERS VOTE ON THE MERGER?
A: Yes, United shareholders will vote on the merger at United's special
meeting of shareholders.
Q. ARE RRUN SHAREHOLDERS ENTITLED TO APPROVE THE MERGER?
A: Yes, RRUN shareholders will have the opportunity to approve the merger
and the merger agreement by written consent. The merger and the merger
agreement require the approval of a majority of the issued and
outstanding shares of both RRUN's common stock.
Q. WHAT DO UNITED SHAREHOLDERS NEED TO DO NOW?
A: United shareholders should promptly mail their signed proxy card in the
enclosed postage-paid envelope so that their shares will be represented
at the United special meeting.
Q. CAN UNITED SHAREHOLDERS CHANGE THEIR VOTE AFTER THEY HAVE DELIVERED
THEIR PROXIES?
A: Yes, United shareholders can change their votes by delivering a written
notice of revocation with United's secretary, sending in later-dated,
signed proxy cards to United's secretary, attending the United special
meeting and voting in person.
Q. WHAT DO RRUN SHAREHOLDERS NEED TO DO NOW?
A: RRUN shareholders should promptly mail their signed written consents in
the enclosed postage-paid envelope to vote their shares of RRUN stock
for the merger.
Q. CAN RRUN SHAREHOLDERS CHANGE THEIR VOTES AFTER THEY HAVE MAILED IN
THEIR WRITTEN CONSENTS?
A: A RRUN shareholder can only revoke or change an action by written
consent prior to the time that RRUN has received the requisite number
of consents to approve the merger. This will be a short period of time,
as RRUN expects to receive sufficient consents to approve the merger
promptly.
Q. SHOULD RRUN SHAREHOLDERS SEND IN THEIR STOCK CERTIFICATES NOW?
A: No. After the merger is complete, United will send RRUN shareholders a
letter to transmittal and written instructions for exchanging their
stock certificates. RRUN shareholders should not surrender their RRUN
stock certificates until after the merger and until they receive the
letter of transmittal.
Q. WHO CAN ANSWER QUESTIONS REGARDING THE MERGER?
A: If you would like additional copies of this proxy statement/prospectus,
or if you have questions about the merger or the other matters
discussed in this document, you should contact:
8
For United Management, Inc.: For RRUN:
United Management, Inc. RRUN Ventures, Inc.
Suite 104 4th Floor
1456 St. Paul St., Kelowna 62 West 8th Avenue
British Columbia V1Y 2E6 Vancouver, BC V5Y 1M7
Canada Canada
Attention: Christine Cerisse Attention: Ray Hawkins
9
PROSPECTUS SUMMARY
United Management, Inc.
We were organized as a Nevada corporation on January 29, 1997 for the
purpose of creating a corporate vehicle to seek, investigate and, if the
investigation warrants, acquire an interest in business opportunities presented
to us by persons or firms who or which desire to employ our funding in their
business or to seek the perceived advantages of a publicly-held corporation.
The executive offices of United are located at Suite 104-1456 St. Paul
St., Kelowna, British Columbia, Canada V1Y 2E6. The telephone number is (250)
868-8177.
In December 2000, we completed an initial public offering for 288,420
shares of our common stock for $.40 per share pursuant to a Registration
Statement that became effective with the Securities and Exchange Commission on
November 28, 2000. In December 2000, we executed an agreement with RRUN
Ventures, Inc., a Nevada corporation, and its shareholders to acquire all of
RRUN Ventures, Inc.'s issued and outstanding shares in exchange for 305,439
shares of our common stock. RRUN's core business venture is RAHX, a platform
that uses Peer to Peer or P2P technologies to enable and enhance the
distribution of digital media files over the Internet.
RRUN Ventures, Inc.
RRUN Ventures, Inc., a development stage company, was incorporated in
the State of Nevada on October 12, 2000. RRUN's core business venture is RAHX, a
platform that uses Peer to Peer, or P2P, technologies to enable and enhance the
distribution of digital media files over the Internet.
RRUN Acquisition
In December 2000, we executed an agreement with RRUN and its
shareholders to acquire all of RRUN's issued and outstanding shares in exchange
for 305,439 shares of our common stock. The share exchange is structured so that
RRUN's current shareholders will own approximately 64% of the outstanding shares
in the post-merger entity on a fully-diluted basis.
We believe, after examining RRUN's business plan, interviewing their
management, and examining their proposed products, that RRUN's software can
successfully compete with other companies in the digital file transfer industry.
The Offering
Shares outstanding prior to the offering 500,000
Shares sold in the offering 288,420 (1)
Shares to be issued to RRUN Ventures 305,439
Shares outstanding after the merger 2,211,859 (2)
(1) Assumes that 100% of the purchasers reconfirm their investment.
There were 37 purchasers in the offering.
(2) This includes shares issuable upon the exercise of stock options
issued by RRUN, which we are assuming.
10
Expiration Date
This offering will expire on November 28, 2001. There is no minimum
number of securities that must be sold in the offering.
Reconfirmation Offering Conducted in Compliance with Rule 419
According to Rule 419, investors must have no fewer than 20 and no more
than 45 business days from the effective date of the post-effective amendment to
decide to reconfirm their investment and remain an investor or, alternately,
require the return of their investment. Each investor has 20 business days from
the date of this prospectus to reconfirm his/her investment. Any investor not
making any decision within the 20 business day period will automatically have
his/her investment returned.
The rule further provides that if we do not complete an acquisition
meeting the specified criteria within 18 months of the effective date of the
initial public offering, all of the deposited funds in the escrow account must
be returned to investors. Therefore, even though we only require a majority of
the shareholders to approve a merger under Nevada corporate law, Rule 419 also
requires that we receive reconfirmation from 80% of the investors in the Rule
419 offering in order to consummate a merger.
Recent Developments
Our board believes that the merger represents a good investment
opportunity for our shareholders and recommends that the investors elect to
accept the reconfirmation offering. The merger agreement was approved by the
directors and shareholders of RRUN by written consent dated December 18, 2000.
The merger agreement was confirmed by the unanimous consent of the directors on
December 18, 2000.
Bob Hemmerling resigned as Secretary, Treasurer and Director in
February, 2001 to pursue other business opportunities.
11
RISK FACTORS
RRUN Has a Limited Operating History. RRUN's operations are subject to
the many risks inherent in a development stage business enterprise operating in
a market dependent upon new technology. The likelihood of RRUN's success must be
considered in light of the problems, expenses, difficulties, complications, and
delays frequently encountered in a new business and the competitive environment
in which it operates. Since inception, RRUN's efforts have been limited
primarily to organizational activities and it has generated no revenues to date.
Its operating history is insufficient for an investor to rely on in making a
judgment about RRUN's future performance. RRUN cannot be certain that its
business strategy will be successful or that it will successfully address the
risks and uncertainties related to RRUN's limited operating history.
We Cannot Assure You That RRUN's Operating Results Will Be Profitable.
RRUN's lack of operating history and unproven business model make it difficult
to accurately forecast RRUN's future revenues or results of operations. RRUN has
no meaningful historical financial data upon which to base planned operating
expenses, and its sales and operating results are difficult to forecast. A
variety of factors may cause RRUN's annual and quarterly operating results to
fluctuate significantly. Many of these factors are outside of RRUN's control and
include:
o the effectiveness of its sales and marketing campaign;
o market acceptance of RRUN's products;
o the amount and timing of its operating costs and capital
expenditures;
o introductions by its competitors of new or enhanced services
or products;
o price competition and fluctuations in the prices of the
products that RRUN sells;
o changes in its management team and key personnel; and
o fluctuations in general economic conditions and economic
conditions specific to RRUN's industry.
One or more of these factors could materially and adversely affect
gross margins and operating results in future periods. Given RRUN's stage of
development and level of revenues, we cannot assure you that RRUN can meet these
estimates, that the assumptions are reliable, or that RRUN will, at any point,
attain profitability.
We have not achieved profitability and, given the level of our planned
operating and capital expenditures, we expect to continue to incur losses and
negative cash flows through at least 2002. Our accumulated deficit since
inception as of March 31,2001 was approximately $428,288. Even if we do achieve
profitability, we may not be able to sustain or increase profitability on a
quarterly or annual basis in the future. If our revenue grows more slowly than
we anticipate, or if our operating expenses exceed our expectations and cannot
be adjusted accordingly, our business will be harmed.
We May Need Additional Capital in the Future and Additional Financing
May Not Be Available, Which Could Affect RRUN's Ability to Continue Operations.
We currently anticipate that our available cash resources, combined with the net
proceeds from this offering and planned financing from private placement funding
will be sufficient to meet our anticipated working capital and capital
expenditure requirements for the next 24 months. Our resources may not be
sufficient for our working
12
capital and capital expenditure requirements. We may need to raise additional
funds through public or private debt or equity financing in order to:
o take advantage of opportunities, including international
expansion or acquisitions of complementary businesses or
technologies;
o develop new products or services; or
o respond to competitive pressures
Any additional financing we may need may not be available on terms
favorable to us, or at all. If adequate funds are not available or are not
available on acceptable terms, we may not be able to take advantage of
unanticipated opportunities, develop new products or services or otherwise
respond to unanticipated competitive pressures, and our business could be
harmed. Our forecast of the period of time through which our financial resources
will be adequate to support our operations is a forward looking statement that
involves risks and uncertainties, and actual results could vary materially as a
result of a number of factors, including those set forth in this "Risk Factor"
section.
RRUN May Not Receive Adequate Cooperation From the Major Record Labels,
Which Could Negatively Affect Its Ability to Generate Revenues. Even though
RRUN's management believes that RAHX is a viable solution to the digital music
dilemma, we cannot assure you that the major records labels will cooperate with
RRUN. If the major record labels do not cooperate in providing content, then
RRUN will move towards securing relationships with independent record labels.
The Internet has become a valuable tool for independents, as they can forgo many
of the middlemen in music distribution and place their materials directly in the
hands of consumers. However, compared to major record labels, independent record
producers own much smaller catalogs, and produce content that is not as popular.
As a result, dependence on independent labels may produce lower revenues, and
adversely affect RRUN's ability to become profitable and to sustain
profitability.
RRUN is Dependent on Key Personnel. RRUN's success is highly dependent
upon certain key management and technical personnel. Ray Hawkins and Pavel Bains
have played important roles in RRUN's founding, development and promotion.
Although RRUN intends to enter into employment agreements with both Mr. Hawkins
and Mr. Bains, the loss of either of them could adversely affect RRUN's
business, financial condition, and results of operations. RRUN intends to apply
for and obtain "key man" life insurance on the life of Mr. Hawkins and Mr.
Bains. We cannot assure you that either of these persons will remain with RRUN
in the future due to circumstances either within or outside of their control. In
addition, competition for qualified personnel is intense, and we cannot assure
you that RRUN will be able to hire or retain additional qualified personnel. Any
inability to attract and retain qualified personnel would adversely effect
RRUN's business.
Issuance of Shares in the Acquisition Will Result in Substantial
Additional Dilution. Our Certificate of Incorporation authorizes the board to
issue 100,000,000 shares of common stock, $.0001 par value. The proposed
acquisition, if completed, will result in our issuing an additional 305,439
shares of common stock and will result in substantial dilution in the percentage
of the common stock held by its present shareholders. Moreover, the common stock
to be issued in the acquisition has been valued on an arbitrary or
non-arm's-length basis by management, resulting in an additional reduction in
the percentage of common stock held by our present shareholders.
There is No Public Market for Our Securities, Which Means You Could
Experience Difficulty in Selling Your Shares. At the present time, there is no
public market for our securities. It is unlikely that a regular trading market
will develop when the reconfirmation offering is concluded, or if developed,
that a market will be sustained, or that our securities purchased by the public
in the offering
13
may be resold at their original offering price or at any other price. Any market
for our securities that may develop will very likely be a limited one. While we
intend to continue to timely file periodic reports under the Securities Exchange
Act of 1934 for so long as we may be required to do so, no assurances are given
that we will continue to file these reports on a voluntary basis. In any event,
due to the low price of our securities, many brokerage firms may choose not to
engage in market making activities or effect transactions in our securities.
Purchasers of our securities may have difficulties in reselling them and many
banks may not grant loans using our securities as collateral. Our securities
will not be eligible for listing on the Nasdaq Stock Market when this
reconfirmation offering is completed.
14
YOUR RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419
DEPOSIT OF OFFERING PROCEEDS AND SECURITIES
Rule 419 requires that offering proceeds, after deducting underwriting
commissions, underwriting expenses and dealer allowances, if any, and the
securities purchased by you and other investors in this offering, be deposited
into an escrow or trust account governed by an agreement that contains certain
terms and provisions specified by Rule 419. Under Rule 419, the funds will be
released to us and the securities will be released to you only after we have met
the following three basic conditions:
First, we must execute an agreement for an acquisition of a business or
asset that will constitute our business and for which the fair value of the
business or net assets to be acquired represents at least 80% of the maximum
offering proceeds, but excluding underwriting commissions, underwriting expenses
and dealer allowances, if any. We have entered into an agreement with RRUN.
Second, we must file a post-effective amendment to the registration
statement that includes the results of this offering including, but not limited
to, the gross offering proceeds raised to date, the amounts paid for
underwriting commissions, underwriting expenses and dealer allowances, if any,
amounts dispersed to us and amounts remaining in the escrow account. In
addition, we must disclose the specific amount and use of funds disbursed to us
to date, including payments to officers, directors, controlling shareholders or
affiliates, specifying the amounts and purposes of these payments. We must also
disclose the terms of the reconfirmation offer with the conditions prescribed by
the rules. The post-effective amendment must also contain information regarding
the acquisition candidate and business, including audited financial statements.
This prospectus complies with this requirement.
Third, we will mail a copy of the prospectus to each investor within
five business days of the effective date a post-effective amendment. This
prospectus is the reconfirmation prospectus. The reconfirmation offering will be
made as described under "Prospectus Summary; Reconfirmation Offering." After we
submit a letter to the escrow agent that the requirements of Rule 419 have been
met and after the acquisition is closed, the escrow agent can release the funds
and securities.
We entered into an escrow agreement with City National Bank, N.A., Los
Angeles, California, which provides that:
The proceeds are to be deposited into the escrow account
maintained by the escrow agent promptly upon receipt. While Rule
419 permits 10% of the funds to be released to us prior to the
reconfirmation offering, we do not intend to release these funds.
The funds and any dividends or interest earned, are to be held
for the sole benefit of the investor and can only be invested in
bank deposit, in money market mutual funds, federal government
securities or securities for which the principal or interest is
guaranteed by the federal government.
All securities issued for the offering and any other securities
issued, including stock splits, stock dividends or similar rights
are to be deposited directly into the escrow account promptly
upon issuance. Your name must be included on the stock
certificates or other documents evidencing the securities. The
securities held in the escrow account are to remain as issued,
and are to be held for your sole benefit. You retain the voting
rights, if any, to the securities held in your name. The
securities held in the escrow account may neither be transferred
or disposed of nor any interest created in them other than by
will or the laws of descent and distribution, or under a
qualified domestic relations order as defined by certain tax laws
or retirement laws.
15
MERGER
Background of the Merger Agreement
In November 2000 we commenced a "blank check" offering under Rule 419
of the Securities Act. The offering was successful in raising $115,368 in gross
proceeds from investors. On November 20, 2000, we started initial discussions
with RRUN. Following November 28, 2000, when our Rule 419 offering closed, we
began serious negotiations with RRUN on December 1, 2000. The acquisition of
RRUN by United became probable on or about December 6, 2000. The merger
agreement between us and RRUN was completed December 18, 2000, and we filed a
post-effective amendment on December 21, 2000. Under Rule 419, $115,368 and
288,420 shares purchased by the investors were placed in escrow pending:
o distribution of a reconfirmation prospectus to the investors
describing the acquisition of RRUN; and
o the subsequent reconfirmation by at least 80% of the investors
that they have elected to remain investors.
In the event the merger is not approved by at least 80% of the
investors, then the shares deposited in the escrow account will not be released
to the investors. Instead, the $115,368 in offering proceeds in the escrow
account will be returned to the investors, and the share certificates will be
canceled. Under Rule 419, the value of RRUN must represent at least 80% of the
maximum offering proceeds, or $92,294. Based upon independent audited financial
statements and an independent valuation of RAHX, Inc., which is 80% owned by
RRUN, RRUN's business value is more than $92,294.
Terms and Conditions of Merger Agreement
Stockholders wishing to obtain a copy of the merger agreement, which is
incorporated into this prospectus by reference, may obtain one without charge by
writing to United Management, Suite 104, 1456 St. Paul St., Kelowna, British
Columbia, Canada V1Y 2E6, attention: Christine Cerisse.
Under the merger agreement, RRUN will be merged into us. If the merger
is consummated, 305,439 shares of common stock will be issued to former RRUN
shareholders. Each shareholder who holds shares of our common stock registered
in the registration statement declared effective by the SEC on November 28, 2000
prior to the merger and who accepts the reconfirmation offer will, after
consummation, hold the same number of shares held prior to the merger, but the
aggregate percentage interest in United Management will be decreased to
approximately 35.6%. RRUN will merge into United Management with United
Management as the surviving entity.
Our name will be changed to "RRUN Ventures, Inc." after the merger. The
merger is intended to be consummated so that the transaction will be tax-free to
all parties involved under Internal Revenue Code Section 368(a)(1)(A). Each
investor who rejects the reconfirmation offer will be paid his or her pro rata
share of the amount in the escrow account at $.40 per share, and current holders
of our common stock, which is restricted from resale under United States
securities laws, will tender their shares to us for cancellation. Governmental
approval is not required to consummate the merger.
The result of the merger, assuming that 80% of the investors reconfirm
their investment, is that former RRUN shareholders will own approximately 67% of
the surviving entity while our current shareholders will own approximately 33%
of United Management on a fully-diluted basis.
16
Investors deciding to accept the reconfirmation offer are directed to
sign a reconfirmation letter and return it to United Management, Inc.,
Attention: Christine Cerisse, who will forward each reconfirmation letter to our
escrow agent. Any investor who fails to return his or her form so that it is
received by Ms. Christine Cerisse within 45 business days from the date of their
reconfirmation prospectus will be deemed to have rejected the reconfirmation
offer and will automatically be sent a check within five business days
representing his or her pro rata share of the funds in the escrow account for
the benefit of the investors.
United Special Meeting
The United Special Meeting of Shareholders will be held at United's
offices located at Suite 104, 1456 St. Paul St., Kelowna, British Columbia,
Canada on August 17, 2001 at 9:00 a.m., local time. At the United annual
meeting, holders of United common stock will be asked to consider and vote upon:
- The merger, the merger agreement and the issuance of shares of
United common stock in the merger
- Any other business that may properly come before the United
annual meeting or any postponement or adjournment
United shareholders are entitled to vote at the United meeting if they
owned shares of United as of July 1, 2001, United's record date. On that date,
there were 788,420 shares of United common stock outstanding and entitled to
vote at the United meeting.
RRUN Written Consents
RRUN shareholders will have an opportunity to approve the merger and
the merger agreement by written consent. Holders of shares of RRUN common stock
at the close of business on the date the first written consent is given are
entitled to submit written consents. As of July 1, 2001 there were 6,108,780
shares of RRUN common stock issued and outstanding. Approval of the merger and
merger agreement requires the approval of the holders of a majority of the
outstanding shares of RRUN common stock.
RRUN Optionholders
Each outstanding option to acquire shares of RRUN common stock shall be
assumed by United. As a result of the merger, each RRUN stock option shall be
treated as an option to acquire shares of United common stock upon the same
manner determined by multiplying the number of shares presently subject to the
RRUN options by the exchange ratio by which the RRUN common shares are to be
exchanged for shares of United common stock in the merger and by dividing the
exercise price for such shares of RRUN common stock by the exchange ratio to
determine the new exercise price. Based on the number of RRUN options that are
expected to be outstanding at the closing of the merger, these options will be
converted into options to purchase approximately 57,150 shares of United common
stock.
Rights of Dissenting Shareholders
United
Under the Nevada Revised Statutes, United shareholders do not have
appraisal rights.
17
RRUN
Under Nevada Revised Statutes, even if enough holders of RRUN common
stock approve the merger, a RRUN shareholder can refuse the merger consideration
and exercise his appraisal rights to dissent and obtain payment for the fair
value of his common stock.
Certain Income Tax Consequences
The merger is intended to qualify as a "tax-free reorganization" for
purposes of the federal income tax law so that United Management's and RRUN's
stockholders will not recognize gain or loss from the transaction. The
transaction is not expected to result in the recognition of gain or loss to
either United Management or RRUN in the respective jurisdictions where each
entity is subject to taxation. No opinion of counsel nor a ruling from the
internal revenue service has been obtained. This statement is for general
information only and our stockholders should consult their own tax advisors as
to the specific tax consequences of the merger to them.
18
DILUTION
The difference between the initial public offering price per share of
common stock and the net tangible book value per share after this offering
constitutes the dilution to investors in this offering. Net tangible book value
per share of common stock is determined by dividing our net tangible book value,
which is total tangible assets less total liabilities, by the number of shares
of common stock outstanding.
As of March 31, 2001, our net tangible book value was -$70,726 or -$.14
per share of common stock. Excluding the $115,368 proceeds of the offering and
the 288,720 shares issued in the offering, our net tangible book value as of
March 31, 2001 was -$70,726 or -$0.14 per share of common stock. Net tangible
book value represents the amount of our total assets, less any intangible assets
and total liabilities. Our net tangible book value as of March 31, 2001 on an
unaudited pro forma combined basis, taking into account the acquisition of RRUN
and issuance of 305,439 shares of common stock to RRUN's present shareholders,
was -$489,283 or approximately -$.22 per share, based on 2,211,859 outstanding
shares of common stock, including 1,118,000 issuable upon the exercise of RRUN
options. The result will be an immediate dilution to our present shareholders,
and substantial dilution of 112.5% to the public investors on a post-offering
basis, and 155% on a post-merger basis. The following tables illustrate this
dilution:
Public offering price per share $.40 100%
Net tangible book value per share
before the offering -$0.14
Increase per share attributable
to new investors $0.09
----
Dilution per share to new investors $0.45 112.5%
===== ======
Number of Shares Before Money Received For Shares Net Tangible Book Value
Offering Before Offering Per Share Before Offering
500,000 $100 -$0.14
Total Number of Shares Total Amount of Money Pro-Forma Net Tangible Book
After Offering Received For Shares Value Per Share After Offering
788,420 $115,368 -$0.05
Public offering price per share $0.40 100%
Net tangible book value per share
before the Offering -$0.14
Proforma net tangible book value per share -$0.22 55%
Post-merger dilution per share to new
investors -$1.62 155%
The tables are based upon the potential acquisition of RRUN, the
possible issuance of 305,439 shares of common stock to present RRUN shareholders
and the assumption that 100% of the investors reconfirm their investment.
19
USE OF PROCEEDS
The gross proceeds of this offering were $115,368. Rule 419 permits 10%
of the funds, or $11,536, to be released from escrow to us prior to the
reconfirmation of the offering. However, we did not request release of these
funds. We will receive the gross proceeds in the event a business combination
with RRUN is closed according to Rule 419.
We have not incurred and do not intend to incur in the future any debt
from anyone other than management for our organizational activities. Debt to
management will not be repaid. Management is not aware of any circumstances that
would change this policy. Also, none of the proceeds are being used to repay
debt. Management will pay the offering expenses.
Under Rule 419, after the reconfirmation offering and the closing of
the business combination, $115,368, plus any dividends received, but less any
amount returned to investors who did not reconfirm their investment under Rule
419, will be released to us, and utilized as follows:
Amount Percent
Gross Proceeds $115,368 100%
Offering Expenses $ 15,000 13.0%
Working Capital $100,368 77.0%
The anticipated application of the net proceeds are for professional
consulting fees, payroll, operational premises rent and equipment leases.
Further detail is provided as follows:
Working Capital Breakdown (listed in order of priority):
Item Amount
Payroll (1) 20,000
Professional Services and Consulting (2) 55,000
Deposits for additional Operational Premises (3) 15,000
Deposits for Equipment leases (4) 10,000
Misc. 368
(1) Payroll Costs Description:
The funds will be used for human resources sourcing of additional staff
and payroll costs attributed to new personnel acquisitions.
(2) Professional Services and Consulting Fees Description:
The funds will be used for the following Professional Service
providers.
Professional Service Provider Amount Purpose
Foley & Lardner 15,000 Legal fees
Price Waterhouse Coopers 22,000 Business consulting/accounting
Cane & Company 8,000 Legal fees
20
Morgan & Company 10,000 Audit fees
(3) Operational Premises Costs Description:
The funds will be used for deposits of new office premises for the
Company, specifically business development offices in New York, NY.
(4) Equipment Leases Costs Description:
The funds will be used for deposits on leases of server equipment,
specifically files and web servers.
The proceeds received in this offering have been placed into the escrow
account pending closing of the pending business combination with RRUN. These
funds are in an insured financial institution in either a certificate of
deposit, interest bearing savings account or in short term federal government
securities as placed by City National Bank, N.A., Los Angeles, California.
21
CAPITALIZATION
Our capitalization on March 31, 2001, and as adjusted to give effect to
the issuance of shares to RRUN's shareholders after the proposed acquisition is
completed, is as follows:
--------------------- ----------------- ----------------------- -------------
UNITED RRUN
MANAGEMENT, INC. VENTURES, INC. ADJUSTMENTS PRO FORMA
------------------ ------------- --- ----------------------- -------------
Loans payable $ 13,106 $183,942 - $197,048
Common Shares Subject to
Reconfirmation $ 115,368 $115,368
------------------ ------------- --- ------------------ ---- -------------
$183,942 -
$ 128,474 $312,416
================== ============= === ================== ==== =============
SHAREHOLDERS' EQUITY
Share Capital $ 50 $ 6,109 (a) (50) $ 6,109
Additional Paid In Capital $ 15,670 $ 4,622 (a) (15,670) $ 4,622
------------------ ------------- --- ------------------ ---- -------------
Deficit $ (86,446) $(429,288) (a) 18,955 $(500,014)
(a) (3,235)
------------------ ------------- --- ------------------ ---- -------------
Capitalization $ (70,726) $(418,557) $(489,283)
================== ============= === ================== ==== =============
(a) Record the reverse take-over transaction
22
THE UNITED SPECIAL MEETING
When and Where the Meeting will be held
This proxy statement/prospectus is being furnished to United
shareholders as part of the solicitation of proxies by the United board of
directors for use at the United special meeting, to be held on August 17, 2001
at 9:00 a.m., local time at United's corporation headquarters at Suite 104, 1456
St. Paul St., Kelowna, British Columbia, Canada and at any adjournments or
postponements thereof.
This proxy statement/prospectus, and the accompanying proxy card, are
first being mailed to holders of United common stock on or about August 7, 2001.
What Will Be Voted Upon
The purpose of the United special meeting is to consider and vote upon
the following proposal:
- to approve the merger, the merger agreement and the issuance of
shares of United common stock in connection with the merger.
The United board of directors does not presently intend to bring any
business before the United meeting other than the specific proposal referred to
above and specified in the notice of the United special meeting. The United
board of directors knows of no other matters that are to be brought before the
United special meeting. If any other business properly comes before the United
special meeting, including the consideration of a motion to adjourn the meeting,
including for purposes of soliciting additional votes, it is the intention of
persons named in the enclosed form of proxy to vote the shares they represent as
the United board of directors may recommend.
Which Shareholders May Vote
Only holders of record of United common stock at the close of business
on July 1, 2001, the United record date, are entitled to notice of and to vote
at the United annual meeting. As of the close of business on the United record
date, there were 788,420 shares of United common stock outstanding and entitled
to vote, held of record by 47 shareholders. A majority, or 403,094 of these
shares, present in person or represented by proxy, will constitute a quorum for
the transaction of business.
How Do United Shareholders Vote
The United proxy card accompanying this proxy statement/prospectus is
solicited on behalf of the United board of directors for use at the United
meeting. Shareholders are requested to complete, date and sign the accompanying
proxy and promptly return it in the accompanying envelope or otherwise mail it
to United. All proxies that are properly executed and returned, and that are not
revoked, will be voted at the United special meeting in accordance with the
instructions indicated. EXECUTED BUT UNMARKED PROXIES WILL BE VOTED FOR APPROVAL
AND ADOPTION OF ALL OF THE MATTERS LISTED ON THE PROXY CARD.
23
How To Change Your Vote
A United shareholder who has given a proxy may revoke it at any time
before it is exercised at the United meeting, by doing one of the following:
- delivering a written notice of revocation with Ms. Christine Cerisse,
President, Suite 676-141, 757 W. Hastings St., Vancouver, BC V6C 1A1, Canada
- executing a subsequently dated proxy and delivering it Ms. Christine
Cerisse, President, Suite 676-141, 757 W. Hastings St., Vancouver, BC V6C 1A1,
Canada
- attending the United special meeting and voting in person.
Attending the United special meeting will not, by itself, revoke a
proxy. The United shareholder must also vote at the meeting.
Vote Required To Approve Each Proposal
Under Nevada law, the charter documents of United, approval of the
merger and approval of the merger agreement and the issuance of shares of United
common stock in connection with the merger requires the affirmative vote of a
majority of the outstanding shares of United common stock.
THE MATTERS TO BE CONSIDERED AT THE UNITED MEETING ARE OF GREAT
IMPORTANCE TO THE SHAREHOLDERS OF UNITED. ACCORDINGLY, SHAREHOLDERS ARE URGED TO
READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY
STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
Solicitation Of Proxies And Expenses Of Solicitation
United's management will bear the cost of the solicitation of proxies
in the enclosed form from its shareholders. In addition to solicitation by mail,
the directors, officers and employees of United may solicit proxies from
shareholders by telephone, telegram, letter, email, facsimile or in person.
Deadline For Receipt Of Shareholder Proposals
Under Rule 14a-8 of the Securities Exchange Act, a shareholder
intending to present a proposal to be included in United's proxy statement for
its 2001 Annual Meeting of Shareholders must deliver a proposal in writing to
its executive offices no later than July 24, 2001.
24
RRUN SOLICITATION OF WRITTEN CONSENTS
Purpose Of Consent Solicitation
RRUN is soliciting written consents from its shareholders to approve
the merger and the merger agreement.
In accordance with RRUN's bylaws and Nevada law, the merger may be
approved and adopted without a meeting of RRUN shareholders by written consent
of at least a majority of the shares of RRUN common stock. If the holders of a
majority of the shares of the RRUN common stock consent to the merger and
approve the merger agreement, no further action will be required by RRUN
shareholders to approve the merger and the merger agreement.
The RRUN board of directors has approved the merger and the merger
agreement, believes that the terms of the merger agreement are fair to and in
the best interests of RRUN and its shareholders, and recommends that the RRUN
shareholders vote "FOR" the merger by executing and returning RRUN written
consents.
Record Date And Consent Rights
The date for determining shareholders of record entitled to give or
withhold consent to the merger will be the date on which the first written
consent is given. Only holders of shares of RRUN common stock at the close of
business on the date the first written consent is given will be entitled to
submit written consents. As of July 1, 2001, there were approximately 7 holders
of record of RRUN shares. There were 6,108,780 shares of RRUN common stock
issued, and each share of which is entitled to one vote on the merger.
A written consent may be revoked by delivery of written notice to the
secretary of RRUN at any time prior to the time duly executed RRUN written
consents have been returned, and not revoked, by the holders of a majority of
the outstanding RRUN common stock.
Expenses Of Consent Solicitation
RRUN written consents are being solicited by and on behalf of the RRUN
board of directors. RRUN will bear all expenses in connection with such
solicitation. In addition to solicitation by use of the mail, RRUN written
consents may be solicited by directors, officers and employees of RRUN in person
or by telephone or other means of communication. Such directors, officers and
employees will not be additionally compensated for, but may be reimbursed for
out-of-pocket expenses incurred in connection with any solicitations.
Required Consents
Approval of the merger and merger agreement requires the approval of
the holders of a majority of the outstanding shares of RRUN common stock. As of
July 1, 2001, neither United nor any of its executive officers or directors
beneficially owned any outstanding shares of RRUN common stock.
RRUN SHAREHOLDERS SHOULD READ AND CAREFULLY CONSIDER THE INFORMATION
PRESENTED IN THIS DOCUMENT, AND COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED RRUN WRITTEN CONSENT IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
25
APPRAISAL RIGHTS
RRUN Shareholders
Holders of RRUN common stock are entitled to exercise dissenters'
rights under Chapter 92A, Sections 92A.380 and 92A.410 through 92A.500 of the
Nevada Revised Statutes. A stockholder of RRUN will be entitled to relief as a
dissenting stockholder if and only if he or she complies strictly with all of
the procedural and other requirements of Sections 92A.380 and 92A.410 through
92A.500 of the Nevada Revised Statutes. A copy of Sections 92A.380 and 92A.410
through 92A.500 is attached as Appendix C. The following is not intended to be a
complete statement of the method of compliance with Sections 92A.380 and 92A.410
through 92A.500 and is qualified in its and by reference to the copy of Sections
92A.380 and 92A.410 through 92A.500 attached as Appendix C.
Right to Dissent
Stockholders of a Nevada corporation have the right to dissent from
certain corporate actions in certain circumstances. According to Nevada Revised
Statutes Sec. 92A.380(1)(a)(1), these circumstances include consummation of a
merger requiring approval of the corporation's stockholders. Stockholders who
are entitled to dissent are also entitled to demand payment in the amount of the
fair value of their shares.
Requirements
According to Nevada Revised Statutes Section 92A.420(1), stockholders
of RRUN who wish to assert dissenters' rights:
-must deliver written notice to RRUN, BEFORE the vote is taken at the
special meeting, of their intent to demand payment for their RRUN
common stock if the merger is completed; and
-must not vote their shares in favor of approval of the merger
agreement.
Stockholders failing to satisfy these requirements will not be entitled
to dissenters' rights under Chapter 92A of the Nevada Revised Statutes.
Thereafter, the "Subject Corporation", as defined below, is required to
send a written dissenters' notice to all RRUN stockholders who satisfied these
two requirements; written notice of intent to demand payment, and not voting in
favor of the merger. The written dissenters' notice is required to be sent
within 10 days after completion of the merger. According to Nevada law, RRUN is
deemed to be the "Subject Corporation" before the merger occurs, and will be the
"Subject Corporation" after the merger occurs. The dissenters' notice must
include:
- a statement of where dissenting stockholders should send their demand
for payment and where and when certificates for RRUN common stock are
to be deposited;
- a form for demanding payment including the date the merger was
announced and a certification from the stockholders asserting
dissenters' rights that they acquired beneficial ownership of the
shares before the date when the terms of the merger were announced to
the news media or the stockholders;
- a date by which the Subject Corporation must receive the demand for
payment, which may not be fewer than 30 or more than 60 days after the
date the dissenters' notice is delivered; and - a copy
26
of sec. 92A.300 through sec. 92A.500 of the Nevada Revised Statutes.
RRUN stockholders wishing to exercise dissenters' rights must
thereafter
- demand payment;
- certify whether they acquired beneficial ownership of RRUN common
stock before December 21, 2001, the date the post-effective Amendment
discussing the merger was filed; and
- Deposit their certificates in accordance with the terms of the
dissenters' notice.
Nevada law further provides that RRUN stockholders who fail to demand
payment or deposit their certificates where required by the dates set forth in
the dissenters' notice will not be entitled to demand payment or receive the
fair market value for their shares of RRUN common stock as provided under Nevada
law. Instead, such stockholders will receive the same merger consideration as
the stockholders of RRUN who do not exercise dissenters' rights.
Payment for Dissenting Shares
RRUN will be required under Nevada law to pay each dissenter who made a
valid demand the amount it estimates to be the fair value of the dissenter's
shares of RRUN common stock, plus accrued interest. RRUN must make such payment
within 30 days after RRUN receives the dissenter's demand for payment. The
payment must be accompanied by:
- a copy of RRUN's financial statements as of December 31, 2000, as
well as RRUN's most current interim financial statements;
- a statement of RRUN's estimate of the fair value of the dissenter's
shares of RRUN common stock;
- an explanation of how interest was calculated;
- a statement of the dissenter's rights to demand payment under Nevada
law of the dissenter's estimate of the value of the RRUN common
stock; and
- a copy of Sections 92A.300 through 92A.500 of the Nevada Revised
Statutes.
RRUN may withhold payment from dissenters who became the beneficial
owners of the shares of RRUN common stock on or after December 21, 2000. If
payment is withheld in this fashion by RRUN, it must estimate the fair value of
the dissenter's shares of RRUN common stock, plus accrued interest, and offer to
pay this amount to each dissenter in full satisfaction of his demand. RRUN is
required to send this offer to all such dissenters with a statement of RRUN's
estimate of the fair value of the shares of RRUN common stock, an explanation of
how interest was calculated and a statement of the dissenters' rights to demand
payment under Nevada law.
Nevada law provides that a dissenter who believes that the amount paid
or offered is less than the full value of his or her shares of RRUN common
stock, or that the interest due is incorrectly calculated, may, within 30 days
after RRUN made or offered payment for the shares, either (1) notify RRUN in
writing of his or her own estimate of the fair value of the shares of common
stock and the amount of interest due and demand payment of the difference in
this estimate and any payments made, or (2) reject the offer for payment made by
RRUN and demand payment of the fair value of his or her shares and interest due.
27
If a demand for payment remains unsettled, RRUN must commence a court
proceeding within 60 days after receiving a demand, petitioning the court to
determine the fair value of the shares of RRUN common stock and accrued
interest. All dissenters whose demands remain unsettled would be made a party to
the proceeding, which would be conducted in the district court of Washoe County,
Nevada. If RRUN fails to commence such a proceeding, it would be required by
Nevada law to pay the amount demanded to each dissenter whose demand remains
unsettled. Dissenters would be entitled to a judgment:
-for the amount determined by the district court to represent the fair
value of their shares, plus accrued interest, less any amount paid
under Section 92A.460 of the Nevada Revised Statutes; or
-for the amount determined by the district court to represent the fair
value of those shares on which RRUN elected to withhold payment under
Section 92A.470 of the Nevada Revised Statutes, plus accrued interest.
The district court will assess the costs of the proceedings against
RRUN; however, some or all of the costs could be assessed against all of the
dissenters to the extent that the court finds that all or some dissenters acted
arbitrarily, vexatiously or not in good faith in demanding payment. The district
court may also assess against RRUN or the dissenters the fees and expenses of
counsel and experts for the respective parties, in the amount the court finds
equitable.
THE REQUIRED APPRAISAL RIGHTS' PROCEDURES MUST BE FOLLOWED EXACTLY OR THE
APPRAISAL RIGHTS MAY BE LOST.
28
PLAN OF OPERATION
The following discussion should be read along with the financial
statements and notes, and by other more detailed financial information appearing
in other parts of this prospectus.
United Management, Inc.
We are in the development stage as of June 30, 2000 and we completed an
initial public offering in December 2000 using a Registration Statement that
became effective with the Securities and Exchange Commission on November 28,
2000 and sold 288,420 shares of its common stock, $.0001 par value, at a price
of $.40 per share. The offering was conducted directly by us without an
underwriter. We are a "blank check" company subject to Rule 419 of Regulation C
which was organized to obtain funding from persons purchasing in the offering in
order to provide a vehicle to take advantage of business opportunities which
management believes arise from time to time.
The deposited funds and the securities to be issued to subscribers are
remaining in escrow and may not be released until an acquisition meeting certain
specified criteria has been made and enough subscribers reconfirm their
investments according to the procedure outlined in Rule 419.
We had no revenues for each of the years ended June 30, 2000 and June
30, 1999. We had a net loss of ($16,932) for the year ended June 30, 2000 as
compared to a net loss of ($1,973) for the year ended June 30, 1999. In
addition, at June 30, 2000, we had total assets of $0 and total liabilities of
$3,235.
We had no revenues for each of the periods ended September 30, 2000 and
September 30, 1999. We had a net loss of ($9,254) for the period ended September
30, 2000 as compared to a net loss of ($5,902) for the period ended September
30, 1999. In addition, at September 30, 2000, we had total assets of $0 and
total liabilities of $12,489.
We had no revenues for each of the periods ended December 31, 2000 and
December 31, 1999. We had a net loss of ($24,121) for the period ended December
31, 2000 as compared to a net loss of ($5,952) for the period ended December 31,
1999. In addition, at December 31, 2000, we had total assets of $0 and total
liabilities of $36,610.
In December 2000, we executed an agreement with RRUN Ventures, Inc., a
Nevada corporation, and its shareholders to acquire all of RRUN's issued and
outstanding shares of capital stock in exchange for 305,439 shares of our common
stock. Assuming this reconfirmation offering and acquisition is completed,
RRUN's business will be our sole business.
RRUN Ventures Inc. Plan of Operation
Upon closing of the merger with United Management Inc., RRUN will
require additional funds to finance its operations. RRUN plans to seek financing
within six months of the merger to capitalize its funding requirements. This
financing will satisfy its cash needs for the first twelve to eighteen months of
operations. To further fund RRUN's business efforts it plans to meet the
requirements to complete a listing on the NASDAQ Small Cap Market and
subsequently execute a secondary offering of its common stock. This proposed
listing on the NASDAQ Small Cap Market is planned for eighteen to twenty-four
months after the closing of the merger between RRUN and United Management Inc.
Over the first twelve months of operations, RRUN will conduct
significant product research and development, or R & D for it's Peer to Peer, or
P2P product, RAHX. From system architecture design to
29
working prototype and Alpha and Beta releases RAHX will be developed within a
accelerated product cycle of six to nine months.
The R & D executed by RRUN will include but will not be limited to:
o Development of the RAHX software and its software subset
components
o Development of the RAHX back end platform system
o Development of various RAHX software licensee user tools
Within the first year of operation RRUN intends to invest significantly
in equipment to be used in developing products, the RAHX back end technology and
corporate file servers. The equipment invested in will include but not limited
to:
o Audio and Video Production equipment for the development of
the interactive front end websites
o Web, File, DNS and Proxy Servers that will handle the
products' capacity needs
o Networking/Communication servers to load balance the traffic
coming through the RAHX websites
RRUN will continue its main operations out of its Vancouver, BC
facility and intends to open business development offices in New York and Los
Angeles.
RRUN anticipates that its staffing levels of RRUN will increase
significantly to approximately 50 employees over the first year of operations to
properly execute its business plan and to support its aggressive growth
strategy.
In addition to increasing the number of employees, additional senior
management will be required to add experience to the present management team and
further RRUN's development. Over the first 12 months, RRUN intends to appoint
additional members to the Board of Directors and form an advisory board of
industry professionals to guide, counsel and assist it through its business
strategy execution.
30
RRUN Ventures Inc. Implementation Plan
The RRUN Ventures Inc. initial implementation is planned over a period
of two phases totaling twenty-four (24) months. Each phase is broken down into a
number of stages that range from two to three months. The implementation plan
during each stage describes the activity across various departments such as
Operations, Finance, Venture Development/Product Development, and
Sales/Marketing/Business Development. Each stage also lists the cost to execute
the stage. The projected cost of each phase is as follows; phase 1, $2,250,000
and; phase 2, $5,000,000. The Company expects to secure the financing to satisfy
the capital needs for each phase through the execution of private placement
investments. The source of the private placement financing will be comprised of
a mix of principal shareholders, private investors and venture capital
companies. If the funding is unavailable, in whole or in part, at the expected
time, the Company will delay implementation of entire components of certain
aspects of the implementation plan until the necessary funding is secured.
Phase 1- Stage A
Duration: 2 months (October 1 - November 30, 2000)
Operations:
o Establish and Incorporate Company
o Set up Vancouver Production office
o Complete evaluation of RAHX, Inc.
o Complete purchase of RAHX, Inc.
o Complete equity purchase of KAPH Data Engineering Inc. shares
Financing:
o Initiate start up financing
Venture Development /Product Development:
o Continue development of RAHXWARE software Sales/Marketing/Business
Development:
o Soliciting to and securing of content owners
o Soliciting to and securing of partners
Cost of Stage:
o Approx. $50K
Phase 1 - Stage B
Duration: 2 months (December 1 - January 31, 2001)
Operations:
o Commence Human Resources (HR) recruitment program
o Identify potential Advisory Board members
o Identify potential Board Directors
Financing:
o Source and secure RTO candidate
Venture Development/Product Development:
o Commence development of RAHX.com website
Sales/Marketing/Business Development:
o Soliciting to and securing of content owners
o Soliciting to and securing of partners
Cost of Stage:
o Approx. $100K
Phase 1 - Stage C
Duration: 3 months (Feb 1 - April 30, 2001)
31
Operations:
o Open Los Angeles business development office
o HR- seek candidates for various positions
o Secure Advisory Board members
o Secure Board Directors
Financing:
o Complete transaction with RTO candidate
o Commence trading as new company on NASD OTC:BB
o Source and secure private placement financing
o Identify investment banker to source further rounds of funding
Venture Development /Product Development:
o Accelerated development of RAHXWARE commences
o Launch of RAHX.com
Sales/Marketing/Business Development:
o Launch of marketing for RAHX.com
o Soliciting to and securing of content owners
o Soliciting to and securing of partners
Cost of Stage:
o Approx. $400K
Phase 1 - Stage D
Duration: 3 months (May 1 - July 31, 2001)
Operations:
o HR- seek candidates for various positions
o Secure Advisory Board members
o Secure Board Directors
o Open business development office In New York
Sales/Marketing/Business Development:
o Marketing of RAHX.com
o Soliciting to and securing of content owners
o Soliciting to and securing of partners
Cost of Stage:
o Approx. $700K
Phase 1 - Stage E
Duration: 2 months (August 1 - September 30, 2001)
Operations:
o HR- seek candidates for various positions
o Secure Advisory Board members
o Secure Board Directors
Financing:
o Source and secure secondary financing
Sales/Marketing/Business Development:
o Launch of marketing for RAHXWARE
o Soliciting to and securing of content owners
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Cost of Stage:
o Approx. $1.0 M
Phase 2 - Stage A
Duration: 3 months (October 1 - December 31, 2001)
Cost of entire phase 2: $5.0 M
Operations:
o Execute strategic plan
o Identify opportunities
Financing:
o Commence process for listing on NASDAQ Small Cap Market or
national market
Venture Development /Product Development:
o Launch of beta version of direct to consumer RAHXWARE software
Sales/Marketing/Business Development:
o Marketing for RAHXWARE and RAHX.com
o Soliciting to and securing of content owners
Phase 2 - Stage B
Duration: 3 months (January 1 - March 30 - 2002)
Operations:
o Execute strategic plan
o Identify opportunities
Venture Development /Product Development:
o Launch of RAHXWARE licensing product
Sales/Marketing/Business Development:
o Marketing for RAHXWARE and RAHX.com
o Soliciting to and securing of content owners
o Sales of RAHXWARE licensing program
Phase 2 - Stage C
Duration: 3 months (April, 2002 - June 30, 2002)
Operations:
o Execute strategic plan
o Identify opportunities
Sales/Marketing/Business Development:
o Marketing for RAHXWARE and RAHX.com
o Soliciting to and securing of content owners
o Sales of RAHXWARE licensing program
Phase 2 - Stage D
Duration: 3 months (July, 2002 - September, 2002)
Operations:
o Execute strategic plan
o Identify opportunities
Financing:
o Complete Listing on Nasdaq Small Cap Market or national market
o Complete secondary offering or private placement
Sales/Marketing/Business Development:
o Marketing for RAHXWARE and RAHX.com
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o Soliciting to and securing of content owners
o Sales of RAHXWARE licensing program
34
DESCRIPTION OF BUSINESS
Introduction
United Management, Inc. was incorporated on January 29, 1997 under the
laws of the State of Nevada to engage in any lawful corporate purpose. Other
than issuing shares to its shareholders, we never commenced any other
operational activities. We can be defined as a "blank check" company, whose sole
purpose at this time is to locate and consummate a merger or acquisition with a
private entity. The board has elected to implement our principal business
purpose, which is described below.
In December 2000, we completed an initial public offering of 288,420
shares of our common stock at a price of $.40 per share using a Registration
Statement that became effective with the Securities and Exchange Commission on
November 28, 2000. In December 2000, we executed an agreement with RRUN
Ventures, Inc. and its shareholders to acquire all of RRUN's issued and
outstanding shares of capital stock in exchange for 305,439 shares of our common
stock. RRUN was incorporated in Nevada in October 2000 and is a multi-media
venture development organization focused on content distribution utilizing the
Internet.
Core Business Venture
RRUN's core business venture is RAHX, a software platform that uses
Peer to Peer, or P2P technologies to enable and enhance the distribution of
digital media files over the Internet. P2P technologies allow users to exchange
digital media files directly from their computers. RAHX focuses on providing
both owners and consumers of media-related content a suite of software products
that address their respective needs. To take advantage of the sudden growth in
the file exchange industry, RRUN expects to launch the RAHX venture before the
end of 2001.
RAHX is used together with the product, RAHXWARE, the software which
consumers use to connect to RAHX.
Opportunities in the Digital Music Industry
There has been a recent media explosion around the controversial music
software company Napster. Napster has caused an uproar within the music
industry, as the company has led the way in pioneering a new process of
distributing music over the Internet. This process has been dubbed file exchange
or P2P. Consumers can now access music files directly with another consumer
without going through a website or centralized server.
However, companies like Napster are currently subject to a number of
highly publicized lawsuits because, among other things, they promote the use of
a software that violates the rights of music copyright owners including major
record labels Sony and Universal. An opportunity arises for a company to create
a feasible solution that not only generates revenue for the major record labels,
but also allows consumers to continue to download and exchange music easily for
a low cost.
RAHX Business Model
RRUN's core business venture is RAHX, a software platform that uses P2P
technologies to enable and enhance the distribution of digital media files over
the Internet. RAHX provides media users and content owners with an end-to-end
solution of distributing music over the Internet by performing the following
functions:
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o Facilitating the transfer and exchanging of digital media
files;
o Managing the income flow from consumers to content owners;
o Storing the income for the benefit of content owners;
o Tracking the content use;
o Distributing the income to content owners; and
o Protecting the consumers with Internet security and content
owners with digital rights management.
RAHX earns income for RRUN through a two-pronged business model: Direct
to Consumer Model and Licensing Model. In the Direct to Consumer Model, RAHX
provides a file exchange service or P2P media service directly to consumers and
uses its file exchange software to generate transaction fees by acting as an
agent to facilitate transactions between consumers and content owners. In the
Licensing Model, RAHX licenses its software to other P2P media services that
desire a method to generate revenue. RAHX bills these file exchange services
software license fees and transaction facilitation fees. Under this model, RAHX
earns a smaller transaction fee rate than in the direct to consumer model.
The Management
RRUN is operated by a team of professionals from the music, marketing,
and technology sectors with core competencies in music industry licensing, Gen X
& Y marketing, results-oriented business management, and systems integration
software design and programming.
Company History
RRUN Ventures Inc. was founded in Vancouver, British Columbia in June
of 2000. RRUN was incorporated in October 2000 under the laws of Nevada.
RRUN's key venture RAHX, Inc., was initially developed by a corporation
controlled by RRUN's founders. RAHX was conceptualized as a software solution
for the digital media file exchange industry. In November 2000, RRUN purchased
the rights to RAHX by acquiring a controlling stake in RAHX, Inc. The first two
RAHX products to emerge are the file exchange software solution RAHXWARE, and
RAHX.net the promotional and support website for all RAHX products.
Currently RRUN is in start-up phase with a staff of ten and operates in
Vancouver, British Columbia. To date RRUN has achieved the following:
o Identified and secured a start-up management team;
o Begun developing relationships with content owners;
o Begun developing a partnership with technology firm Kaph Data
Engineering;
o Begun sourcing financing and exploring options to initiate an
initial public offering;
o Created a RAHX demo, a RAHX introductory trailer, and a RRUN
website; and
o Developed a relationship with a technology/entertainment law
firm whose clients include: NARAS, AOL, Microsoft, Sony and
BMG.
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RRUN's primary strength is its people. This group consists of
individuals who developed their skills while dealing with the technological
changes in the new economy. This group brings experience in marketing, financial
software development, entertainment, technology, and project management. As a
start-up, RRUN is able to move quickly and adapt to a dynamic environment.
However, RRUN must also overcome the barriers that arise in the start-up phase.
These barriers include the lack of:
o Full financial capitalization to maximize operations; and
o Strategic alliances with the major record labels and
associations.
RRUN has already begun moving past these barriers through a number of
steps that will be instrumental for RAHX's success. First, RRUN has used its
contact base to begin recruitment of experienced advisors and executive
management from the music and media industries. Second, RRUN plans to initiate
an initial public offering on one of the North American Stock Exchanges. Third,
RRUN is seeking to develop relationships with the major record companies in the
music industry.
Products
RAHXWARE
The RAHX platform is used with the product RAHXWARE, the downloadable
client software, which users use to connect to RAHX.
RAHX.COM and RAHX.net
RAHX.com and RAHX.net are complementary products to RAHX. These
websites are used to promote the RAHX product line and accumulate a user base
for RAHX. The RAHX.com website provides multi-media content to inform and
entertain users and the RAHX.net site provides customer support to RAHX
licensees.
Product Benefits
RRUN believes that RAHX offers the best file exchange solution for
consumer, music artists, and copyright owners.
First, RAHX is designed to accurately record, collect, and distribute
music royalties to their rightful owners. Since digital music emerged on the
Internet, record companies have been searching for a viable system that allows
them to use a financial system that will appeal to consumers. The RAHX Platform
allows for consumers to purchase music for a reasonable price, and in turn
deposit the money into the account of the copyright owner.
Second, if other P2P media services employ the RAHX financial
subsystem, RRUN expects that it will save record companies and copyright owners
the time and money lost in lawsuits.
Third, RRUN anticipates that through RAHX, artists and record labels
can generate revenue for no additional costs. For every dollar generated on a
sale of a CD, tape, or vinyl record, the artist and record label incurs costs
due to the manufacturing and marketing dollars spent on the physical recording.
With digital music, there is no additional manufacturing or marketing costs as
the music product of the artist and record label is only a digital file of a
sound recording.
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Fourth, RRUN believes that RAHX will allow consumers to easily locate
outdated or hard-to-find songs; and can provide compensation to copyright owners
for these music recordings. Many times record companies stop distributing music
recordings because it may be too expensive to manufacture and inventory product
that is not in high demand. As a result, consumers are unable to find older
music, and artists are not able earn revenue from these potential sales. RAHX
can provide a system that will benefit both consumers and artists.
Fifth, RRUN expects that RAHX will give independent artists an
opportunity to showcase their talent and generate revenue from the sales of
their music. Through RAHX, independent artists will have another medium that
directly distributes their music over the Internet. As a result, artists can
maximize their revenues and retain control of their music.
Technology
RAHX combines standard Internet and EDI protocols with XML programming
and various other software tools.
RAHX consists of four subsystems:
o File Exchange System
o Content Management System
o Commercial Transaction System
o Digital Rights Management System
These four systems are integrated to function as one unified RAHX
system.
From System Architecture Design to Alpha and Beta releases and testing
to full release, RAHX will be developed at an accelerated cycle of six to nine
months. The development will require a staff of 25; consisting of
programmers/integrators, project managers, and a projected budget of $2 million.
The technology behind RAHX produces the following features and
capabilities:
o Royalty tracking - RAHX compiles accounting of all music
single downloads by detailing copyright owners and accurately
reporting music royalty remittance;
o Customer debit accounts - RAHX establishes debit accounts for
its customers to facilitate their purchases of downloaded
music;
o Transaction facilitation - RAHX uses a
transaction-facilitating engine that simultaneously debits the
account of a buyer and credits the accounts of the music
owners;
o Catalogue database - RAHX syncs with new and existing and new
music databases to accurately identify all music recordings
within the exchange network; and
o Firewall protection - RAHX provides a security firewall to
protect end users.
RRUN intends to file for a patent on RAHX and all of its components
when it completes its working prototype.
Although the technology used to create RAHX is proprietary, RRUN
expects that others will be able to substantially reproduce the patented results
within six months. To remain on the leading edge,
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RRUN expects that it must devote a minimum of approximately 5% of revenues
towards RAHX research and development.
Intellectual Property
Patents
The RAHX platform is a proprietary property consisting of numerous
individual proprietary assets. RRUN has begun to prepare the necessary documents
to achieve its' patents. RRUN has begun preparing the system architecture
designs that will accompany the patent applications.
In patenting RAHX and its' subsystems, RRUN will patent the base
concept, business model, and subsequently the data model architecture.
The patenting will include software/hardware components at a high
level. Individual software and/or hardware components built to work within the
initial framework of the RAHX platform will also undergo copyright, followed by
patenting.
It takes two to three years to complete a patent, so as the system
grows, it is initially copyrighted and a patent is filed when the entire system
is integrated. At the inception phase any component will be linked to a
manufacturing process that may be copyrighted for uniqueness, and included in
the design requirements for the patent.
Trademarks
RRUN has already begun the process of preparing the documents necessary
to obtain trademarks for the following:
o RRUN Ventures Inc.;
o RAHX, Inc.;
o RAHX.com;
o RAHX.net;
o RAHX; and
o RAHXWARE.
As more names are created for the RAHX and its subsystems, RRUN will
continue to obtain trademarks for their protection.
Potential Liability From Digital Distribution of Copyrighted Music
Operation of RRUN's digital platform may result in liabilities or
levels of unacceptance that may affects its profitability. Specifically, one or
more of the factors listed below may result in liability or levels of
unacceptance that may harm its present or future operations:
1) If RRUN's products and services do not accurately or completely
provide rights reporting information, record companies and artists might not use
its platform to digitally deliver their recorded music, and its business might
be harmed.
2) RRUN might incur liability for the content of the recorded music
that it digitally delivers for the following reasons:
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o Because RRUN digitally delivers recorded music to third
parties, it might be sued for negligence, copyright
infringement, trademark infringement or other reasons.
o These claims might include, among others, claims that by
hosting, directly or indirectly, the websites of third
parties, it is liable for copyright or trademark infringement
or other wrongful actions by these third parties through these
websites.
o While RRUN has taken steps to prevent these claims, we cannot
assure you that RRUN will successfully defend these claims.
Even if a claim does not result in liability, RRUN could incur
significant costs in investigating and defending against them.
3) RRUN's success and ability to compete substantially depends on its
internally developed technologies and trademarks, which it protects through the
application of patent, copyright, trade secret and trademark laws. However:
o Patent applications or trademark registrations may not be
approved. Even if they are approved, its patents or trademarks
may be successfully challenged by others or invalidated.
o If its trademark registrations are not approved because third
parties own these trademarks, its use of these trademarks
would be restricted unless it enters into arrangements with
the third-party owners, which might not be possible on
commercially reasonable terms or at all.
o Despite its efforts to protect its proprietary rights from
unauthorized use or disclosure, parties may attempt to
disclose, obtain or use its solutions or technologies.
o The steps RRUN has taken may not prevent others from
misappropriating its solutions or technologies in foreign
countries where laws or law enforcement practices may not
protect its proprietary rights as fully as in the United
States.
Protection of Proprietary Rights
RRUN's success and ability to compete substantially depends on its
internally developed technologies and trademarks, which it protects through a
combination of patent, copyright, trade secret and trademark laws. Patent
applications or trademark registrations may not be approved. Even if they are
approved, its patents or trademarks may be successfully challenged by others or
invalidated. If its trademark registrations are not approved because third
parties own these trademarks, its use of these trademarks would be restricted
unless it enters into arrangements with the third-party owners, which might not
be possible on commercially reasonable terms or at all. The primary forms of
intellectual property protection for its products and services internationally
are patents and copyrights. Patent protection throughout the world is generally
established on a country-by-country basis.
To date, RRUN has not applied for any patents outside the United
States. It may do so in the future. Copyrights throughout the world are
protected by several international treaties, including the Berne Convention for
the Protection of Literary and Artistic Works. Despite these international laws,
the level of practical protection for intellectual property varies among
countries. In particular, United States government officials have criticized
various countries, including China and Brazil, for inadequate intellectual
property protection. If its intellectual property is infringed in any country
without a high level of intellectual property protection, its business could be
harmed. RRUN generally enters into confidentiality or license agreements with
its employees, consultants and corporate partners, and
40
generally controls access to and distribution of its technologies, documentation
and other proprietary information.
Despite its efforts to protect its proprietary rights from unauthorized
use or disclosure, parties may attempt to disclose, obtain or use its solutions
or technologies. The steps RRUN has taken may not prevent others from
misappropriating its solutions or technologies, particularly in foreign
countries where laws or law enforcement practices may not protect its
proprietary rights as fully as in the United States. RRUN has licensed, and it
may license in the future, certain proprietary rights to third parties. While it
attempts to ensure that the quality of its brand is maintained by its business
partners, they may take actions that could impair the value of its proprietary
rights or its reputation. In addition, these business partners may not take the
same steps RRUN has taken to prevent others from misappropriating its solutions
or technologies.
Market Research
P2P Industry
P2P computing facilitates direct person-to-person communication,
information, and file sharing from one PC to another. P2P distributes processing
power, file storage, and network traffic to the edges of the net, thus allowing
individual computer users to exchange video, music and text files without the
involvement of a centralized source or server.
P2P computing differs from the traditional server based system by:
o Enabling users to retain control and privacy over their
information compared with posting personal data to a central
server
o Eliminating multiple database support compared with a single
"hub" of information on your PC
o Enabling live file and information viewing compared with a
more static environment
o Reducing data transfer times and facilitating a richer, more
personal communications experience
Before P2P media services emerged, Internet users located music over
the web by spending countless hours searching millions of websites for specific
music recordings, or by visiting MP3 music sites like MP3.com and Emusic.com,
where they were given access to a limited amount of music and were required to
pay for it. As a result, consumers were not able to find the specific music they
were searching for in a cost-effective manner. Napster was the first P2P media
service to enter the market and provide users with a convenient method of
locating music. Users were now able to type a music title in a search field and
any computer that contained the search item throughout the network was
displayed.
Most of the P2P media services have not generated any form of revenue.
The tendency of these companies is to release the software, build a user base
then hope to leverage that customer group to generate advertising revenue. Since
the inception of P2P technology, no universally accepted revenue model has
emerged from Napster, Gnutella, iMesh or any of the other current P2P media
services..
Although there is no current research available regarding the potential
size of the P2P market, RRUN believes that a large market exists for its
product. Its expectations stem from the fact that music is
41
only the first of many digital file types that will be transferred between
computers over the Internet. For example, consumers are already able to trade
movies in the controversial Div-X format. Just like MP3s changed the music
industry, Div-X is doing the same for the movie industry. Div-X movies are DVD
quality and can be copied from a PC hard drive to a regular CD. The CD is then
played in a standard DVD player. Other digital files currently being exchanged
over P2P media services are e-books, text documents, photo images, and software
programs. As a result, RRUN believes that the consumer demand for these P2P
media services can only continue to expand, resulting in potentially greater
revenue streams for companies that possess a sustainable business model.
Recent News and Changes
Since RRUN's inception, several actions have taken place that can
effect how the industry and financial markets view RRUN and its RAHX project.
First, BMG and Napster have decided to form an alliance. This is significant in
that BMG is one of the major record labels that are suing Napster. BMG has shown
the entire media industry that P2P technologies are viable and potentially
lucrative innovations that must be embraced rather than halted. Furthermore,
this alliance has opened up new opportunities as other P2P media services will
attempt to form separate partnerships with each of the record labels.
Second, Scour Exchange, another P2P media service recently declared
bankruptcy. Scour was forced to do so because the financial community did not
view investing in a company without a revenue model as a wise choice. This
recent news gives further validity to RAHX as RRUN believes that it has
developed a feasible P2P model that can generate revenue.
Third, Intel has recently made a strategic business move to fund P2P
companies through their Intel Capital division. At the same time Intel has
created a P2P working group among 17 companies, including IBM and Hewlett
Packard. This move signifies the importance of P2P and media services like RAHX,
and how these systems have the potential to expand the scope of the Internet.
Competition
Competitors
Currently there are over 25 music P2P services on the Internet, and
seven, Napster, Gnutella, Hotline, Cute MX, iMesh, AudioGalaxy, and Spin Frenzy,
have emerged as the major participants due to their claims of large consumer
user bases. Because these companies were the first group to offer P2P media
services, and because they charge no user fees, they claim they have been able
to quickly amass large user bases. As a result, these companies have gained an
initial head start over RAHX.
However, the recent bankruptcy filing by Scour and the alliance between
BMG and Napster prove that these companies cannot continue offering copyrighted
material for free. Napster has proposed implementing a subscription model, and
when this financial system is placed in the next six months, a percentage of
Napster's user base will look for an alternative to paying flat monthly fees.
RRUN believes that RAHX, which may charge for downloads but is designed to offer
superior quality and advanced features, will emerge as the best alternative.
Currently, all of the competitors to RAHX fail to offer security to
their users through the use of technology features like firewalls. In a P2P
network, where all users are directly connected to one another, security becomes
a major issue as the system allows hackers easy access into the computers of
users.
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RRUN's Competitive Advantages
Through the RAHX technology, RRUN aims to differentiate itself from
competitors and penetrate the market quickly through a number of competitive
advantages it believes it possesses.
First, RAHX is developed to give consumers added security through a
built-in firewall and virus scan component. Management believes no competitor
offers any security device for their users. As competitors begin to implement
some type of revenue system over the next 12 months, management believes users
are expected to shy away from paying for a system that does not protect their
hard-drives.
Second, RRUN is developing RAHX to maintain quality standards to ensure
consumers receive a level of quality assurance regarding the music recording(s)
they have purchased. On the current P2P media services, management believes
there are no quality ratings to ensure users receive the correct music
recording(s). Management believes users currently take a chance each time they
download, and are often disappointed that by the end of their download.
Downloading a song can take anywhere from thirty seconds to one hour, and
sometimes consumers receive a song with very poor sound quality.
Third, RAHX is designed to account for every downloaded music
recording, ensuring the owners receive credit. Currently, management believes no
competitor can properly track whom the music file belongs to through their P2P
network.
Marketing Plan
Key Objectives
RRUN's marketing strategy will be a key factor in achieving success in
its overall strategic plan. Effectively executing the marketing strategy will
help the Company realize the following objectives:
1. Develop a RAHX.net brand awareness;
2. Build a strong RAHX customer base;
3. Develop RAHX awareness in the file exchange industry; and
4. Complete licensing agreements with P2P media services.
The Company will execute its marketing strategy for RAHX over three
periods. The marketing strategy covers elements of distribution, promotion, and
pricing. The marketing strategy spans across two years in accordance with the
aforementioned implementation plan. (i.e. the RRUN Ventures Inc. initial
implementation is planned over a period of two phases totaling twenty-four (24)
months. Each phase is broken down into a number of stages that range from two to
three months). During each phase and subsequent stages the marketing strategy
evolves in accordance with development and distribution of RAHX.
The periods are broken down into the following (based on the
aforementioned Implementation Plan):
o Phase 1 - Stages A through E: October 1, 2000 - September 30,
2001
o Phase 2 - Stages A and B: October 1, 2001 - March 30, 2002
o Phase 2 - Stages C and D: April 1 - September 30, 2002
Distribution Strategy
The objectives of the distribution strategy are:
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1) To most efficiently execute a rapid and widespread deployment of:
o The RAHX digital file exchange executable software for
consumers
o The RAHX platform for licensees
2) To produce and launch the RAHX.com and RAHX.net websites to serve as
the distribution location for the RAHXWARE software product
3) To achieve a significant distribution reach through RAHX licensee
customers that would integrate the RAHX plug-in with their browser, and
distribute RAHX to their users through system wide dynamic upgrades
The Distribution Strategy Implementation Timeline (as per
aforementioned Implementation Plan) is as follows:
Phase 1- Stage A through E: October 1, 2000 - September 30, 2001
o Launch of RAHX.com during Stage C (Feb 1 - April 30, 2001)
Phase 2 - Stage A and B: October 1 - March 30, 2002
o Launch of beta version of direct to consumer RAHXWARE software
during Stage A (October 1 - December 31, 2001)
o Launch of RAHXWARE licensing product during Stage B (January 1 -
March 30 - 2002)
Phase 2 - Stage C and D: April 1 - September 30, 2002
o Continued distribution effort through sales of RAHXWARE licensing
program
Promotion Strategy
The objective of the promotion strategy is to effectively invest
promotion and advertising dollars to attain a critical mass of RAHX users and
RAHX enabled licensees. Within the first year RRUN expects to:
o Develop RAHX brand awareness
o Build a base of loyal RAHX users
o Develop relationships with digital music companies and P2P
media services
o Develop relationships with leading companies in the content
industries, i.e., music, movies, publishing, etc.
The Promotion Strategy Implementation Timeline (as per aforementioned
Implementation Plan) is as follows:
Phase 1- Stage A through E: October 1, 2000 - September 30, 2001
o Launch of marketing promotional strategy for RAHX.com during
Stage C (Feb 1 - April 30, 2001)
o Launch of marketing promotional strategy for RAHXWARE Stage E
(August 1 - September 30, 2001)
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Phase 2 - Stage A and B: October 1 - March 30, 2002
o Continued marketing promotional strategy for RAHXWARE and
RAHX.com
o Launch of marketing promotional strategy for RAHXWARE licensing
sales program Stage B (January 1 - March 30 - 2002)
Phase 2 - Stage C and D: April 1 - September 30, 2002
o Continued marketing promotional strategy for RAHXWARE and
RAHX.com
o Continued marketing promotional strategy for RAHXWARE
licensing program
The details of the promotion strategy are as follows:
The promotional mix will revolve around Direct Sales, Internet Marketing, Trade
Shows, Promotions, Advertising and Publicity in support of the launches of
RAHX.com and RAHXWARE.
1) Direct Sales
RRUN intends to build a RAHX sales team that will research, develop,
and maintain relationships with potential and established P2P media services.
This team is expected to serve as liaisons with licensee customers and
constantly be on the front lines searching out new customers at tradeshows,
conventions, etc.
2) Internet Marketing
RRUN seeks to develop a marketing program that will research, develop
and implement an online marketing strategy to create RAHX.com and RAHX software
brand awareness and get the RAHX message to consumers and potential licensee
customers. This will include search engine positioning, affiliate programs,
online news releases, direct mailing lists, newsgroup monitoring, newsletter
distribution, and other innovative web marketing tools still in development.
3) Trade Shows
Attendance at industry trade shows can provide RAHX with an excellent
cost effective opportunity to source potential partners, competition, and other
product development opportunities. The RAHX sales team would attend trade shows
that focus on the digital entertainment industry.
4) Promotions
o Promotional teams - RAHX aims to develop brand awareness in
the minds of its target consumer market and increase the RAHX
user base through street-level marketing tactics. The RAHX
Promo Teams will visit local hot spots frequented by the
target consumers, including universities, nightclubs, sporting
events, etc.
o Sponsorships - RAHX plans to sponsor entertainment, sporting,
music and other events in each American market that target a
typical RAHX consumer. This effort can provide an excellent
opportunity to develop RAHX brand awareness and to associate
the RAHX brand with the lifestyle of the target consumer.
5) Advertising
RAHX plans to implement an extensive advertising campaign in each local
market to create RAHX brand awareness and increase RAHX membership. The
advertising campaign will be done
45
through print, radio, and the Internet. Each of these mediums will be targeted
towards the consumer market.
6) Publicity
RAHX seeks to generate publicity through news releases, cutting edge
publicity campaigns and, charity events. These marketing initiatives will strive
to spread the RAHX name in each local market and tie RAHX in with the local
community.
Pricing Strategy
RAHXWARE will be offered to consumers and licensees for free through
the RAHX websites. However, as stated, consumers who download music recordings
through RAHXWARE will be charged a subscription fee or a per music recording
price.. RAHX and the content owners will set the actual price.
Summary of Marketing Costs under the previously mentioned marketing strategy
periods (derived from the Implementation Plan):
Phase 1 - Stages A through E: October 1, 2000 - September 30, 2001
o Approximately $ 725,000
Phase 2 - Stages A and B: October 1, 2001 - March 30, 2002
o Approximately $ 1,300,000
Phase 2 - Stages C and D: April 1 - September 30, 2002
o Approximately $ 1,300,000
Operations
Facilities
RRUN operates out of a leased 3600 sq. ft office/production premises in
Vancouver, British Columbia in a Class B commercial building. RRUN has an option
to secure additional space in the building. RRUN is likely to exceed current
facilities after one year when it will either move to larger premises, or move
some departments to another property.
Operating out of Vancouver, BC allows RRUN access to a highly talented
labor pool at a much lower cost than it would outside of Canada.
RRUN intends to open two business development offices in New York and
Los Angeles. These offices are necessary to remain in close proximity to the
major media companies. In doing so, RRUN can develop the numerous business
relationships necessary for success.
46
Equipment
Within the first four to six months RRUN intends to invest $1,000,000
in equipment to be used in developing products, the RAHX backend technology, and
corporate file servers. In months seven to twelve, RRUN expects to invest an
additional $600,000.
Labor
RRUN intends to employ 22 people within the first three months and
plans to grow to 50 within a year. It plans to use a number of resources in
locating and recruiting talent.
Annual salaries for staff and executives will range through four
levels: $36,000, $60,000, $100,000 and $150,000.
RRUN also has a stock option plan. 535,000 options have been issued to
officers and employees under the plan. An additional 608,000 options were issued
to consultants.
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PRINCIPAL SHAREHOLDERS
The table below lists as of the date of this Prospectus, the beneficial
ownership of our voting securities by each person known by us to be the
beneficial owner of more than 5% of our securities, as well as the securities
beneficially owned by all our directors and officers. The table indicates the
number and percentage of shares held before and after the proposed acquisition.
Unless specifically indicated, the shareholders listed possess sole voting and
investment power with respect to the shares shown.
Shares to be
Directors, Officers and 5% Shares Beneficially Owned Beneficially Owned
Stockholders Prior to Acquisition After Acquisition
Number Percent Number Percent
550605 B.C. Ltd.(5) 0 0 140,700(1) 6.3%
4th Floor, 62 W. 8th Avenue
Vancouver, B.C. V5Y 1M7
Ray A. Hawkins(5) 0 0 162,489(2) 7.3%
71-1075 Granville Street
Vancouver, B.C. V6Z 1L4
Pavel Bains(5)9351 Granville 0 0 131,500(2) 5.9%
Street
Richmond, B.C. V6Y 1P9
Edwin Kwong(5) 0 0 119,000(2) 5.4%
986 W. 37th Avenue
Vancouver, B.C. V5Z 2L5
Saya Kyvrikosaios(5) 0 0 119,000(2) 5.4%
#306 - 1139 West Broadway
Vancouver, B.C. V6H 1G1
Pickwick Company(6) 0 0 200,000(3) 9.0%
#267 - 1755 Robson Street
Vancouver, B.C. V6G 3B7
Gurpal Johal(5) 0 0 200,000(3) 9.0%
18536 58 B Street
Surry, B.C. V3S 5X9
EMH, LLC(7) 0 0 80,000(3) 3.6%
25 Flint Hill Road
West Tisbury, MA 02575
USA
Carl Jennings(5) 0 0 103,000(3) 4.6%
7413 Oskaloosa Drive
Derwood, MD 20855-2651
USA
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Christine Cerisse 30.4% 152,000 6.8%
Suite 104, 1456 St. Paul St.
Kelowna, British Columbia
Canada V1Y 2E6
Bob Hemmerling 30.4% 152,000 6.8%
Suite 104, 1456 St. Paul St.
Kelowna, British Columbia
Canada VIY 2E6
All United Management 60.8% N/A N/A0%
directors
and officers as a group
(2 persons)
All RRUN directors and 1,775,689(4) 79.3%
officers as a group
(3 persons)
(1) Ray A. Hawkins owns 74% of 550605 B.C. Ltd.
(2) Includes 100,000 shares issuable upon the exercise of options.
(3) Issuable upon the exercise of options.
(4) Includes 300,000 shares issuable upon the exercise of options.
(5) These RRUN shareholders will receive the shares indicated upon consummation
of the merger. None of the investors in the offering are currently or will be
holders of 5% or more of our securities immediately after the merger.
(6) Pickwick Company is 100% owned by Lawrence Austin, 520-177 Telegraph Rd.,
Bellingham, WA 98226.
(7) EMH, LLC is 100% owned by Norman B. Hall, 25 Flint Hill Rd, West Tisbury,
MA 02575.
All the stock shown above are common stock. The balance of our
outstanding Common stock are held by 8 persons.
49
MANAGEMENT
Christine M. Cerisse, 45, President and sole Director, was appointed to
her position on January 29, 1999. Ms. Cerisse has spent over 19 years in the
financial industry in the field of financial planning and financial management.
She is a Chartered and Registered Financial Planner and has been a principal in
both a financial planning company and a broker dealer company. Ms. Cerisse has
provided management and business consulting for start-up project teams, as well
as been a principal in various entrepreneurial businesses including real estate
development and property management, product distribution networks and several
environmental companies. Ms. Cerisse has over twenty five years involvement in
managing her own corporate portfolio of investments, including residential,
commercial, and industrial properties, stocks, bonds, commodities and other
securities. She devotes a nominal part of her time to our business.
Prior "Blank Check" Experience
Christine M. Cerisse has no prior experience as an officer of a blank
check company, and has no prior direct experience in identifying emerging
companies for investment and/or business combinations. As of the date of this
Prospectus, Ms. Cerisse has not raised capital or attempted to raise capital for
a blank check company.
Upon consummation of the merger, our directors and officers will be as
follows:
Name Age Position
Ray Hawkins 31 Director, President and CEO
Edwin Kwong 29 Director, COO
Saya Kyvrikosaios 32 Director, VP Product and Technology
Development
RRUN Resumes
Ray Hawkins - Director, President & CEO. As the President & CEO, Mr.
Hawkins duties include the forging of business development, securing of
partnerships, and overseeing product development, and marketing campaigns.
Mr. Hawkins is a serial entrepreneur with over a decade of experience
in the fields of media, entertainment, and marketing. From 1990-1995, Mr.
Hawkins operated his own music artist management firm, RAH Talent. During that
time Mr. Hawkins also acted as the CEO of Empire Communications, a record label
that produced a number of cutting edge music artists. From 1993-1997 Mr. Hawkins
acted as a music consultant, procuring cutting edge music for movie and
television production houses like Paramount Pictures and video game companies
like Electronic Arts. From 1996-1999 Mr. Hawkins was the founder, President, and
CEO of TAXI Communications Network Inc., a leading edge media and marketing firm
that produced a popular local culture magazine, TAXI Vancouver, and developed
urban based marketing campaigns for companies like Labatt Breweries, Universal
Music, Virgin Megastore and Molson Canada.
Edwin Kwong - Director, COO. Mr. Kwong uses his background in finance
and project management to oversee the day-to-day operations of RRUN.
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Mr. Kwong has over 5 years of international management consulting
experience in Project Management and Finance in Canada and Asia. In 1993 Mr.
Kwong received a Bachelor of Commerce in Finance from the University of British
Columbia. In 1996 Mr. Kwong received a Graduate Diploma in Asian Pacific
Management. From 1994-1996 Mr. Kwong worked as Investment Advisor Assistant for
Great Pacific Management in Vancouver. From 1996 to 1997 Mr. Kwong acted as a
consultant in Hong Kong for Manulife International Ltd. and Ernst and Young
Management Consulting. From 1997-1998 Mr. Kwong was a Project Executive for
Hopewell Holdings in Hong Kong and Indonesia. In 1998 Mr. Kwong completed his
Level 1 examination in the Chartered Financial Analyst program. From 1999-2000
Mr. Kwong was the Senior Business Specialist for Intria Items Inc., a financial
technology solutions division of Canadian Imperial Bank of Commerce.
Saya Kyvrikosaios - Director, VP Product and Technology Development.
Mr. Kyvrikosaios is a well-diversified management and technology professional
and uses his skills and experience to lead the product and technology
development for RRUN.
From 1991-1995 Mr. Kyvrikosaios acted as the Branch Manager and
Implementation Consultant for Laurentian Bank. From 1995-1998 Mr. Kyvrikosaios
was the Project Manager and Technology Implementation Consultant for Credit
Union Enterprise Datawest Ltd. From 1998-2000 Mr. Kyvrikosaios acted as the
Project Leader of Western Canada for INTRIA Items Inc., a subsidiary of the
Canadian Imperial Bank of Commerce. In 1999 Mr. Kyvrikosaios received his
Bachelor's degree in Business Administration from Simon Fraser University.
The above listed officers and directors will serve until the next
annual meeting of the shareholders or until their death, resignation,
retirement, removal, or disqualification, or until their successors have been
duly elected and qualified. Vacancies in the existing Board of Director are
filled by majority vote of the remaining Directors. The officers serve at the
will of the Board of Directors. There are no family relationships between any
executive officer and director.
Conflicts of Interest
Members of our management are associated with other firms involved in a
range of business activities. Consequently, there are potential inherent
conflicts of interest in their acting as our officers and directors. Because the
officers and directors are engaged in other business activities, management
anticipates it will devote only a minor amount of time to our affairs. As a
result, we may not identify a viable acquisition candidate within 18 months of
the date of this prospectus.
Our officers and directors are now and may in the future become
shareholders, officers or directors of other companies that may be formed for
the purpose of engaging in business activities similar to those conducted by us.
Accordingly, additional direct conflicts of interest may arise in the future
with respect to individuals acting on our behalf or other entities. Moreover,
additional conflicts of interest may arise with respect to opportunities that
come to these individuals' attention in the performance of their duties. We do
not currently have a right of first refusal pertaining to opportunities that
come to management's attention where the opportunity may relate to our proposed
business operations.
The officers and directors are, so long as they remain officers or
directors, subject to the restriction that all opportunities contemplated by our
plan of operation that come to their attention, either in the performance of
their duties or in any other manner, will be considered opportunities of, and be
made available to us and the other companies that they are affiliated with on an
equal basis. A breach of this requirement will be a breach of the officers' or
directors' fiduciary duties. If we or the companies that the officers and
directors are affiliated with both desire to take advantage of an opportunity,
then those officers and directors would abstain from negotiating and voting upon
the opportunity. However, all directors may still individually take advantage of
opportunities if we should decline to do so. Except
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as stated above, we have not adopted any other conflict of interest policy with
respect to those transactions.
EXECUTIVE COMPENSATION
United
Ms. Cerisse has not received any compensation for her services rendered
to us. Also, Ms. Cerisse is not accruing any compensation under any agreement
with us.
No retirement, pension, profit sharing, stock option or insurance
programs or other similar programs have been adopted by us.
RRUN
RRUN's officers have agreed to act without cash compensation until
authorized by the Board of Directors. They have accepted and executed stock
options agreements in lieu of current cash compensation.
RRUN will execute management compensation agreements with their current
executives within 60 days of the date we consummate the merger. None of the
directors are accruing any compensation under any agreement with RRUN.
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SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Name Title Salary Options Exercise Price Expiration Date
---- ----- ------ ------- -------------- ---------------
Ray Hawkins CEO $0 100,000 $.10 12/1/03
Edwin Kwong COO $0 100,000 $.10 12/1/03
Saya Kyvrikosaios VP $0 100,000 $.10 12/1/03
No retirement, pension or insurance programs or other similar programs
have been adopted by RRUN for the benefit of its employees.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
United
There have been no related party transactions, or any other
transactions or relationships.
RRUN
In November 2000, RRUN issued 4,200,000 shares at an ascribed value of
$209,315 to founding shareholders and to a company controlled by certain
founding shareholders as part of the acquisition of its technology asset.
As of December 8, 2000, RRUN Ventures, Inc. owed a total of $29,861.59
to RRUN Ventures, Inc.'s President and CEO, Ray Hawkins. There is no loan
agreement in place for funds forwarded to RRUN Ventures, Inc. This debt is
interest free and has no specific terms of repayment.
LEGAL PROCEEDINGS
There is no litigation pending or threatened by or against us.
MARKET FOR OUR COMMON STOCK
There is no trading market for our common stock at present and there
has been no trading market to date. Management has not undertaken any
discussions with any prospective market maker concerning the participation in
the aftermarket for our securities and management does not intend to initiate
any discussions until we have consummated a merger or acquisition. We cannot
guarantee that a trading market will ever develop or if a market does develop,
that it will continue.
Market Price
Our common stock is not quoted at the present time. The Securities and
Exchange Commission has adopted a Rule that defines a "penny stock," for
purposes relevant to us, as any equity security that has a market price of less
than $5.00 per share or with an exercise price of less than $5.00 per share,
subject to certain exceptions. For any transaction involving a penny stock,
unless exempt, the rules require:
o that a broker or dealer approve a person's account for
transactions in penny stocks; and
53
o the broker or dealer receive from the investor a written
agreement to the transaction, setting forth the identity and
quantity of the penny stock to be purchased.
o To approve a person's account for transactions in penny
stocks, the broker or dealer must:
o obtain financial information and investment experience and
objectives of the person; and
o make a reasonable determination that the transactions in penny
stocks are suitable for that person and that person has
sufficient knowledge and experience in financial matters to be
capable of evaluating the risks of transactions in penny
stocks.
The broker or dealer must also deliver, prior to any transaction in a
penny stock, a disclosure schedule prepared by the Commission relating to the
penny stock market, which, in highlight form,
o sets forth the basis on which the broker or dealer made the
suitability determination; and
o that the broker or dealer received a signed, written agreement
from the investor prior to the transaction.
Disclosure also has to be made about the risks of investing in penny
stock in both public offering and in secondary trading, and about commissions
payable to both the broker-dealer and the registered representative, current
quotations for the securities and the rights and remedies available to an
investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.
We cannot predict whether, upon a successful merger or acquisition, we
will qualify our securities for listing on Nasdaq or some other national
exchange, or be able to maintain the maintenance criteria necessary to insure
continued listing. Failure to qualify our securities or to meet the relevant
maintenance criteria after qualification in the future could mean that our
securities would not be traded on a national exchange. However, trading, if any,
in our securities may then continue in the non-Nasdaq over-the-counter market.
As a result, a shareholder may find it more difficult to dispose of, or to
obtain accurate quotations as to the market value of, our securities.
Escrow
The common stock under this offering will remain in escrow until our
closing of a business combination with RRUN under the requirements of Rule 419.
There are currently ten holders of our outstanding common stock. The outstanding
common stock was sold in reliance upon an exemption from registration contained
in Section 4(2) of the Securities Act. None of our officers, directors, current
shareholders or any of their affiliates or associates purchased any of the
shares in this offering.
Penny Stock Regulation
Our securities are not currently quoted on any recognized quotation
medium. While we cannot assure you that a public market will ever develop for
our common stock, if a market should develop, trading our common stock would be
subject to the requirements of certain rules promulgated under the Securities
Exchange Act of 1934, which require additional disclosure by broker-dealers in
connection with any trades involving a stock defined as a penny stock. A penny
stock is generally any non-Nasdaq equity security that has a market price of
less than $5.00 per share, subject to certain exceptions. These
54
rules require the delivery, prior to any penny stock transaction, of a
disclosure scheduled explaining the penny stock market and the risks associated
them, and impose various sales practice requirements on broker-dealers who sell
penny stocks to persons other than established customers, accredited investors
and institutions. For these types of transactions, the broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. The additional
burdens imposed upon broker-dealers by these requirements may discourage them
from effecting transactions in our securities, which could severely limit the
liquidity of our securities and the ability of purchasers in this offering to
sell the securities in the secondary market.
Dividends
We have not paid any dividends to date, and have no plans to do so in
the immediate future.
Transfer Agent
We do not have a transfer agent at this time.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 100,000,000 shares, of common
stock, par value $.0001 per share. There are 500,000 shares of common stock
issued and outstanding, as of the date of this filing.
Common Stock
All shares of common stock have equal voting rights and, when validly
issued and outstanding, are entitled to one vote per share in all matters to be
voted upon by shareholders. The shares of common stock have no preemptive,
subscription, conversion or redemption rights and may be issued only as fully
paid and nonassessable shares. Cumulative voting for electing directors is not
permitted, which means that the holders of a majority of the issued and
outstanding shares of common stock represented at any meeting where a quorum is
present will be able to elect the entire Board of Directors if they so choose.
In that event, the holders of the remaining shares of common stock will not be
able to elect any directors. In the event we are liquidated, each shareholder is
entitled to receive a proportionate share of our assets available for
distribution to shareholders after the payment of liabilities and after
distribution in full of preferential amounts, if any. All shares of our common
stock issued and outstanding are fully paid and nonassessable. Holders of stock
are entitled to share pro rata in dividends and distributions with respect to
the common stock, as may be declared by the Board of Directors out of legally
available funds.
There are no outstanding options or warrants to purchase, or securities
convertible into, our common equity. The 500,000 shares of our common stock
currently outstanding are restricted securities as that term is defined in the
Securities Act.
RRUN Options
RRUN has issued 535,000 options to its officers and employees, and
608,000 options to consultants. We are assuming the stock option plan and
agreements as part of the merger.
55
SHARES ELIGIBLE FOR FUTURE RESALE
There has been no public market for our common stock and we cannot
assure you that a significant public market for our common stock will be
developed or be sustained after this offering. Sales of substantial amounts of
common stock in the public market after this offering, or the possibility of
substantial sales, could harm prevailing market prices for the common stock or
our future ability to raise capital through an offering of equity securities.
If 100% of the investors reconfirm their investment, we will have
788,420 shares outstanding. The 288,420 shares sold in this offering will be
freely tradable without restriction or further registration under the Securities
Act unless purchased by "affiliates" of United Management, Inc., as that term is
defined in Rule 144 under the Securities Act described below. The 305,839 shares
to be issued when the merger is consummated will be restricted stock under Rule
144.
RRUN has issued 535,000 options to its officers and directors under its
stock option plan. An additional 608,000 options were issued to consultants.
These options will be assumed by us as part of the merger transaction.
REPORTS TO STOCKHOLDERS
We are subject to the information requirements of the Securities
Exchange Act of 1934. We file reports and other information with the Securities
and Exchange Commission. We intend to furnish our shareholders, after the close
of each fiscal year, an annual report that will contain audited financial
statements certified by our independent certified public accountants. We may
also furnish our shareholders quarterly reports containing unaudited financial
information. RRUN's fiscal year ends on December 31.
LEGAL MATTERS
The validity of the shares offered under this prospectus is being
passed upon for us by Evers & Hendrickson LLP of San Francisco, California.
EXPERTS
Our financial statements as of the period ended June 30, 2000, and
included in this prospectus and in the registration statement, have been so
included in reliance upon the reports of Cordovano & Harvey, P.C., independent
certified public accountants, included in this prospectus, and upon the
authority of the firm as experts in accounting and auditing.
RRUN's financial statements as of the period ended November 15, 2000,
and included in this prospectus and in the registration statement, have been so
included in reliance upon the reports of Morgan & Company, Charted Accountants,
independent accountants, included in this prospectus, and upon the authority of
the firm as experts in accounting and auditing.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article XII of the Articles of Incorporation and Article VI of our
Bylaws, as amended, state certain indemnification rights. Our Bylaws provide
that we will possess and may exercise all powers of indemnification of officers,
directors, employees, agents and other persons and all incidental powers and
authority. Our Board of Directors is authorized and empowered to exercise all of
our powers of
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indemnification, without shareholder action. Our assets could be used or
attached to satisfy any liabilities subject to indemnification.
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities
The Nevada Revised Statutes, as amended, authorize us to indemnify any
director or officer under certain prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorneys'
fees actually and reasonably incurred in any action, suit or proceedings,
whether civil, criminal, administrative or investigative, to which the person is
a party by reason of being a director or officer if it is determined that the
person acted under the applicable standard of conduct stated in the statutory
provisions. Our directors and officers are indemnified to the full extent
permitted by Nevada law in our Articles of Incorporation.
We may also purchase and maintain insurance for the benefit of any
director or officer that may cover claims for situations where we could not
provide indemnification.
Although indemnification for liabilities arising under the `33 Act may
be permitted to officers, directors or persons controlling us under Nevada law,
we have been informed that in the opinion of the U.S. Securities and Exchange
Commission, this form of indemnification is against public policy as expressed
in the `33 Act, and is considered unenforceable.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
In January, 2000, we appointed Cordovano & Harvey, P.C. to replace
Kish, Leake & Associates, P.C. as our principal accountants. The report of Kish,
Leake & Associates, P.C. on our financial statements did not contain an adverse
opinion or a disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope or accounting principles. We had no disagreements with
them on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure. We did not consult with Cordovano &
Harvey, P.C. on any accounting or financial reporting matters in the periods
prior to their appointment. The change in accountants was approved by the Board
of Directors. We filed a Form 8-K with the Commission (File No. 000-27233) on
January 24, 2000.
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Appendix A
UNITED MANAGEMENT, INC.
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of UNITED MANAGEMENT, INC., a Nevada
corporation, hereby acknowledges receipt of the Notice of Special Meeting of
Shareholders and Proxy Statement/Prospectus, each dated August 7, 2001, and
hereby appoints Christine Cerisse as proxy and attorney-in-fact, with full power
of substitution, on behalf and in the name of the undersigned, to represent the
undersigned at the Special Meeting of Shareholders of UNITED MANAGEMENT, INC.,
to be held on August 17, 2001 at 9:00 a.m., local time, at Suite 104, 1456 St.
Paul St., Kelowna, British Columbia V1Y 2E6, Canada, and any adjournment(s) or
postponement(s) thereof, and to vote all shares of common stock which the
undersigned would be entitled to vote if then and there personally present, on
the matters set forth on the reverse side.
PROPOSAL TO APPROVE THE MERGER, APPROVE AND ADOPT THE MERGER AGREEMENT AND
APPROVE THE ISSUANCE OF SHARES PURSUANT TO THE MERGER AGREEMENT.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matter(s) which may properly come before the meeting and at any adjournment(s)
thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [ ]
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, WILL BE
VOTED FOR THE APPROVAL OF THE MERGER, THE APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT, AND THE APPROVAL OF THE ISSUANCE OF SHARES OF UNITED COMMON STOCK
PURSUANT TO THE MERGER AGREEMENT.
Such attorney or substitute shall have and may exercise all of the powers of
said attorney-in-fact hereunder.
Dated:______________________________
____________________________________
Signature
____________________________________
Signature
(This proxy should be marked, dated, signed by the shareholder(s) exactly as his
or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicated. If shares are held
by joint tenants or as community property, both should sign.)
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Appendix B
WRITTEN CONSENT OF THE STOCKHOLDERS OF
RRUN VENTURES, INC.
IN LIEU OF SPECIAL MEETING
As authorized by Section 78.325 of the Nevada Revised Statutes and by
Section 6 of the bylaws of RRUN Ventures, Inc. (the "Corporation"), the
undersigned, constituting record holders of (i) a majority of the issued and
outstanding common stock of the Corporation, without a meeting and based upon
this written consent, do hereby take and consent to the following action:
APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION
WHEREAS, the Boards of Directors of United Management, Inc. ("United")
and this Corporation believe that it is advisable and in the best interests of
the corporations and their stockholders that this Corporation succeed United
through a reverse merger (the "Merger") of this Corporation and United, as
provided in the Agreement and Plan of Reorganization dated as of December 18,
2000 by and among United and RRUN Corporation (the "Merger Agreement"); and
WHEREAS, the Board of Directors of this Corporation found that the
Merger is fair and in the best interests of this Corporation's stockholders.
RESOLVED: That the stockholders of this Corporation hereby approve the
terms of the Merger and hereby adopt the Merger Agreement;
RESOLVED FURTHER: That the said Merger Agreement and the terms and
conditions set forth and provided therein are hereby in all respects approved,
adopted, authorized, and agreed to;
RESOLVED FURTHER: That the proper officers of this Corporation are
hereby authorized and directed to execute and file a certificate of merger in
the office of the Secretary of the State of the State of Nevada; and
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RESOLVED FURTHER: That this Written Consent may be executed in one or
more counterparts each of which shall constitute an original, but all of which,
taken together, shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned has duly executed this Written
Consent as of the date hereof:
Dated: August ___, 2001 [STOCKHOLDER]
-----------------------------------------
Name of Authorized Representative
(if shareholder is an institution)
-----------------------------------------
Title (if applicable)
-----------------------------------------
Signature
Number of Shares Held
Common Stock ____________________________
60
NEVADA REVISED STATUTES
NRS 92A.380 Right of stockholder to dissent from certain corporate actions and
to obtain payment for shares.
1. Except as otherwise provided in NRS 92A.370 and 92A.390, a stockholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of any of the following corporate actions:
(a) Consummation of a plan of merger to which the domestic corporation is a
party:
(1) If approval by the stockholders is required for the merger by NRS 92A.120 to
92A.160, inclusive, or the articles of incorporation and he is entitled to vote
on the merger; or
(2) If the domestic corporation is a subsidiary and is merged with its parent
under NRS 92A.180.
(b) Consummation of a plan of exchange to which the domestic corporation is a
party as the corporation whose subject owner's interests will be acquired, if he
is entitled to vote on the plan.
(c) Any corporate action taken pursuant to a vote of the stockholders to the
event that the articles of incorporation, bylaws or a resolution of the board of
directors provides that voting or nonvoting stockholders are entitled to dissent
and obtain payment for their shares.
2. A stockholder who is entitled to dissent and obtain payment under NRS 92A.300
to 92A.500, inclusive, may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to him or
the domestic corporation. (Added to NRS by 1995, 2087)
NRS 92A.410 Notification of stockholders regarding right of dissent.
1. If a proposed corporate action creating dissenters' rights is submitted to a
vote at a stockholders' meeting, the notice of the meeting must state that
stockholders are or may be entitled to assert dissenters' rights under NRS
92A.300 to 92A.500, inclusive, and be accompanied by a copy of those sections.
2. If the corporate action creating dissenters' rights is taken by written
consent of the stockholders or without a vote of the stockholders, the domestic
corporation shall notify in writing all stockholders entitled to assert
dissenters' rights that the action was taken and send them the dissenter's
notice described in NRS 92A.430. (Added to NRS by 1995, 2089; A 1997, 730)
NRS 92A.420 Prerequisites to demand for payment for shares.
1. If a proposed corporate action creating dissenters' rights is submitted to a
vote at a stockholders' meeting, a stockholder who wishes to assert dissenter's
rights:
(a) Must deliver to the subject corporation, before the vote is taken, written
notice of his intent to demand payment for his shares if the proposed action is
effectuated; and
(b) Must not vote his shares in favor of the proposed action.
2. A stockholder who does not satisfy the requirements of subsection 1 and NRS
92A.400 is not entitled to payment for his shares under this chapter. (Added to
NRS by 1995, 2089; 1999, 1631)
61
NRS 92A.430 Dissenter's notice: Delivery to stockholders entitled to assert
rights; contents.
1. If a proposed corporate action creating dissenters' rights is authorized at a
stockholders' meeting, the subject corporation shall deliver a written
dissenter's notice to all stockholders who satisfied the requirements to assert
those rights.
2. The dissenter's notice must be sent no later than 10 days after the
effectuation of the corporate action, and must:
(a) State where the demand for payment must be sent and where and when
certificates, if any, for shares must be deposited;
(b) Inform the holders of shares not represented by certificates to what extent
the transfer of the shares will be restricted after the demand for payment is
received;
(c) Supply a form for demanding payment that includes the date of the first
announcement to the news media or to the stockholders of the terms of the
proposed action and requires that the person asserting dissenter's rights
certify whether or not he acquired beneficial ownership of the shares before
that date;
(d) Set a date by which the subject corporation must receive the demand for
payment, which may not be less than 30 nor more than 60 days after the date the
notice is delivered; and
(e) Be accompanied by a copy of NRS 92A.300 to 92A.500, inclusive. (Added to NRS
by 1995, 2089)
NRS 92A.440 Demand for payment and deposit of certificates; retention of rights
of stockholder.
1. A stockholder to whom a dissenter's notice is sent must:
(a) Demand payment;
(b) Certify whether he acquired beneficial ownership of the shares before the
date required to be set forth in the dissenter's notice for this certification;
and
(c) Deposit his certificates, if any, in accordance with the terms of the
notice.
2. The stockholder who demands payment and deposits his certificates, if any,
before the proposed corporate action is taken retains all other rights of a
stockholder until those rights are canceled or modified by the taking of the
proposed corporate action.
3. The stockholder who does not demand payment or deposit his certificates where
required, each by the date set forth in the dissenter's notice, is not entitled
to payment for his shares under this chapter. (Added to NRS by 1995, 2090; A
1997, 730)
NRS 92A.450 Uncertificated shares: Authority to restrict transfer after demand
for payment; retention of rights of stockholder.
1. The subject corporation may restrict the transfer of shares not represented
by a certificate from the date the demand for their payment is received.
2. The person for whom dissenter's rights are asserted as to shares not
represented by a certificate retains all other rights of a stockholder until
those rights are canceled or modified by the taking of the proposed corporate
action. (Added to NRS by 1995, 2090)
62
NRS 92A.460 Payment for shares: General requirements.
1. Except as otherwise provided in NRS 92A.470, within 30 days after receipt of
a demand for payment, the subject corporation shall pay each dissenter who
complied with NRS 92A.440 the amount the subject corporation estimates to be the
fair value of his shares, plus accrued interest. The obligation of the subject
corporation under this subsection may be enforced by the district court:
(a) Of the county where the corporation's registered office is located; or
(b) At the election of any dissenter residing or having its registered office in
this state, of the county where the dissenter resides or has its registered
office. The court shall dispose of the complaint promptly.
2. The payment must be accompanied by:
(a) The subject corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, a statement of income
for that year, a statement of changes in the stockholders' equity for that year
and the latest available interim financial statements, if any;
(b) A statement of the subject corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's rights to demand payment under NRS 92A.480;
and
(e) A copy of NRS 92A.300 to 92A.500, inclusive. (Added to NRS by 1995, 2090)
NRS 92A.470 Payment for shares: Shares acquired on or after date of dissenter's
notice.
1. A subject corporation may elect to withhold payment from a dissenter unless
he was the beneficial owner of the shares before the date set forth in the
dissenter's notice as the date of the first announcement to the news media or to
the stockholders of the terms of the proposed action.
2. To the extent the subject corporation elects to withhold payment, after
taking the proposed action, it shall estimate the fair value of the shares, plus
accrued interest, and shall offer to pay this amount to each dissenter who
agrees to accept it in full satisfaction of his demand. The subject corporation
shall send with its offer a statement of its estimate of the fair value of the
shares, an explanation of how the interest was calculated, and a statement of
the dissenters' right to demand payment pursuant to NRS 92A.480. (Added to NRS
by 1995, 2091)
NRS 92A.480 Dissenter's estimate of fair value: Notification of subject
corporation; demand for payment of estimate.
1. A dissenter may notify the subject corporation in writing of his own estimate
of the fair value of his shares and the amount of interest due, and demand
payment of his estimate, less any payment pursuant to NRS 92A.460, or reject the
offer pursuant to NRS 92A.470 and demand payment of the fair value of his shares
and interest due, if he believes that the amount paid pursuant to NRS 92A.460 or
offered pursuant to NRS 92A.470 is less than the fair value of his shares or
that the interest due is incorrectly calculated.
2. A dissenter waives his right to demand payment pursuant to this section
unless he notifies the subject corporation of his demand in writing within 30
days after the subject corporation made or offered payment for his shares.
(Added to NRS by 1995, 2091)
63
NRS 92A.490 Legal proceeding to determine fair value: Duties of subject
corporation; powers of court; rights of dissenter.
1. If a demand for payment remains unsettled, the subject corporation shall
commence a proceeding within 60 days after receiving the demand and petition the
court to determine the fair value of the shares and accrued interest. If the
subject corporation does not commence the proceeding within the 60-day period,
it shall pay each dissenter whose demand remains unsettled the amount demanded.
2. A subject corporation shall commence the proceeding in the district court of
the county where its registered office is located. If the subject corporation is
a foreign entity without a resident agent in the state, it shall commence the
proceeding in the county where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign entity was located.
3. The subject corporation shall make all dissenters, whether or not residents
of Nevada, whose demands remain unsettled, parties to the proceeding as in an
action against their shares. All parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
4. The jurisdiction of the court in which the proceeding is commenced under
subsection 2 is plenary and exclusive. The court may appoint one or more persons
as appraisers to receive evidence and recommend a decision on the question of
fair value. The appraisers have the powers described in the order appointing
them, or any amendment thereto. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
5. Each dissenter who is made a party to the proceeding is entitled to a
judgment:
(a) For the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the subject corporation; or
(b) For the fair value, plus accrued interest, of his after-acquired shares for
which the subject corporation elected to withhold payment pursuant to NRS
92A.470. (Added to NRS by 1995, 2091)
NRS 92A.500 Legal proceeding to determine fair value: Assessment of costs and
fees.
1. The court in a proceeding to determine fair value shall determine all of the
costs of the proceeding, including the reasonable compensation and expenses of
any appraisers appointed by the court. The court shall assess the costs against
the subject corporation, except that the court may assess costs against all or
some of the dissenters, in amounts the court finds equitable, to the extent the
court finds the dissenters acted arbitrarily, vexatiously or not in good faith
in demanding payment.
2. The court may also assess the fees and expenses of the counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the subject corporation and in favor of all dissenters if the court
finds the subject corporation did not substantially comply with the requirements
of NRS 92A.300 to 92A.500, inclusive; or
(b) Against either the subject corporation or a dissenter in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously or not in good faith with respect to the
rights provided by NRS 92A.300 to 92A.500, inclusive.
3. If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the subject
64
corporation, the court may award to those counsel reasonable fees to be paid out
of the amounts awarded to the dissenters who were benefited.
4. In a proceeding commenced pursuant to NRS 92A.460, the court may assess the
costs against the subject corporation, except that the court may assess costs
against all or some of the dissenters who are parties to the proceeding, in
amounts the court finds equitable, to the extent the court finds that such
parties did not act in good faith in instituting the proceeding.
5. This section does not preclude any party in a proceeding commenced pursuant
to NRS 92A.460 or 92A.490 from applying the provisions of N.R.C.P. 68 or NRS
17.115. (Added to NRS by 1995, 2092)
65
Appendix D
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-12
UNITED MANAGEMENT, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Board of Directors - United Management, Inc.
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee Paid:
[ ] Fee paid previously with preliminary materials.
66
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
67
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
Filing Party:
Date Filed:
68
UNITED MANAGEMENT, INC.
Suite 104-1456 St. Paul St., Kelowna,
British Columbia, Canada V1Y 2E6
PROXY STATEMENT
For the Annual Meeting of Shareholders
to be held on November 24, 2000
This Proxy Statement and the accompanying proxy are furnished to the
shareholders of United Management, Inc. (the "Company") in connection with the
solicitation of proxies by the Board of Directors for use at the 2000 Annual
Meeting of Shareholders (the "Annual Meeting"). The Annual Meeting will be held
on Friday, November 24, 2000, beginning at 9:00 am at the Company's
headquarters, located at Suite 104-1456 St. Paul St., Kelowna, British Columbia,
Canada V1Y 2E6, and at any postponements or adjournments of the Annual Meeting.
The Annual and Interim Report of the Company for the year ended June 30, 2000,
the Notice of Annual Meeting, this Proxy Statement and the enclosed proxy were
initially mailed to the shareholders on or about November 11, 2000. The enclosed
proxy is being solicited by the Board of Directors of the Company.
The Company is paying all costs of preparing, assembling and mailing
this Proxy Statement. The Company has made arrangements to forward copies of
proxy materials to brokerage houses, custodians, nominees and fiduciaries for
forwarding of proxy soliciting material to the beneficial owners of the Common
Stock of the Company at the Company's expense. In addition to the solicitation
of proxies by mail, some of the officers, directors and regular employees of the
Company may without additional compensation solicit proxies by telephone or
personal interview. The Company will bear the costs of these solicitations.
Voting and Revocability of Proxies
Shareholders are encouraged to complete the enclosed proxy and return
it to the Company as soon as possible. Any person who completes the enclosed
proxy may revoke it at any time prior to its exercise by delivering to the
Secretary of the Company either a signed statement revoking the proxy or a
properly executed proxy bearing a later date. A shareholder may also revoke a
proxy by attending the Annual Meeting and voting his or her shares personally.
Proxies that have been properly dated, signed and returned will be voted in
accordance with the instructions given by the shareholder. If a proxy is signed
and returned but no voting instructions are given, each valid proxy will be
voted in the election of directors FOR those nominees presented by the Board of
Directors and FOR approval of Cordovano & Harvey, P.C. as the independent
auditors of the Company and FOR approval of Foley & Lardner as the Company's
outside counsel. Should any other business properly come before the Annual
Meeting, the person or persons named as the proxy shall be allowed to vote on
such matter as that person or those persons determine in his, her or their sole
discretion.
69
Abstentions will be counted as shares present or represented and
entitled to vote for the purposes of determining whether a quorum exists at the
Annual Meeting. Broker non-votes are deemed to be not present for the purposes
of determining whether a quorum exists.
Shareholders of record as of the close of business on August 25, 2000
are entitled to notice of the Annual Meeting and to vote in person or by proxy.
The Common Stock of the Company (the "Common Stock") is the only class of
outstanding securities entitled to vote at the Annual Meeting. As of the close
of business on August 25, 2000, there were 500,000 shares of Common Stock
outstanding and entitled to vote. The presence of a majority of the outstanding
shares of Common Stock, either in person or by proxy, will constitute a quorum
at the Annual Meeting.
PROPOSAL NUMBER 1
ELECTION OF DIRECTORS
The Company's Bylaws provide that the Board of Directors shall consist
of between one and five members, with the exact number of directors between one
and five to be determined by the Board of Directors. The Board of Directors has
set the number of directors at two, and there are currently two members of the
Board of Directors.
Persons may be nominated for election to the Board of Directors by the
shareholders upon the making of a proper motion at the Annual Meeting.
Two directors are to be elected at the Annual Meeting to serve until
the following annual meeting of shareholders. The Board of Directors will
present at the Annual Meeting for election and recommends a vote FOR the
following nominees: Christina Cerisse and Bob Hemmerling. Each nominee was
recommended unanimously by the Board of Directors for presentation to the
shareholders for election at the Annual Meeting. Each nominee is currently a
member of the Board of Directors.
Persons receiving a plurality of the votes cast at the Annual Meeting
will be elected to the Board of Directors. A "plurality" means that the
individuals who receive the largest number of votes cast are elected as
directors up to the maximum number of directors to be chosen. Votes against any
candidate and any shares not voted (such as by abstention or broker non-votes)
will have no impact on the election of directors. All proxies will be voted FOR
the election of each of these nominees unless authority to vote for the election
of any nominee or nominees is withheld by the shareholder giving the proxy. If
any nominee should unexpectedly decline or be unable to act as a director, the
proxies may be voted for a substitute nominee to be designated by the Board of
Directors. The Board of Directors does not believe that any nominee will decline
to serve.
Shareholders are entitled to one vote for each share held.
Background information with respect to the two nominees for election to
the Board of Directors is set forth below.
70
NOMINEES FOR ELECTION TO BOARD OF DIRECTORS
Christine M. Cerisse, President, was appointed to her position on
January 29, 1999. Ms. Cerisse has spent over 19 years in the financial industry
in the field of financial planning and financial management. She is a Chartered
and Registered Financial Planner and has been a principal in both a financial
planning company and a broker dealer company. Ms. Cerisse has provided
management and business consulting for start-up project teams, as well as been a
principal in various entrepreneurial businesses including real estate
development and property management, product distribution networks and several
environmental companies. Ms. Cerisse has over twenty five years involvement in
managing her own corporate portfolio of investments, including residential,
commercial, and industrial properties, stocks, bonds, commodities and other
securities. She devotes a nominal part of her time to our business.
Robert Hemmerling, Secretary, Treasurer and a director, was appointed
to his positions with the Company on April 21, 1997. In addition to his
positions with the Company, since September 1996, Mr. Hemmerling has been
employed with Strathmore Resources, Ltd., Kelowna, British Columbia in the
investor relations department. Strathmore Resources is engaged in the business
of acquiring and developing uranium properties. Prior, from January 1996 through
August 1996, Mr. Hemmerling was unemployed. From January 1992 through December
1995, Mr. Hemmerling was an electrician with Concord Electric, Kelowna, British
Columbia. He devotes only such time as necessary to the business of the Company,
which time is expected to be nominal.
Directors are elected at annual meetings of the shareholders to terms
which extend until the following annual meeting. Officers are appointed by, and
serve at the discretion of, the Board of Directors.
The Board of Directors met once in 2000 as of the date of this Proxy
Statement. Each director has attended all of the meetings of the Board of
Directors during such period as that director has been a member of the Board of
Directors.
No members of the Board of Directors are currently compensated for
attending meetings of the Board of Directors.
There are no agreements between the Company and any of its officers or
directors which concern changes of control of the Company.
Reports under Section 16(a) of the Exchange Act
Pursuant to Rules 16a-2(a) and 16b-3(a), the Company's directors,
executive officers and principal shareholders were not required to file an
initial Form 3, and are not required to file a Form 5.
71
SECURITIES OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the number
of shares of the voting securities which each director, each nominee for
election to the Board of Directors the percentage of shares which the executive
officers and directors owned as a group as of August 25, 2000. The only class of
equity securities which has a present right to vote in elections of directors is
the Common Stock.
Director Number of Shares Percent of
Name(1) Since Address Beneficially Owned Class
Christine Cerisse 1999 Suite 104-1456 St. Paul St., 152,000 30.4
Kelowna, British Columbia,
Canada V1Y 2E6
Bob Hemmerling 1997 Suite 104-1456 St. Paul St., 152,000 30.4
Kelowna, British Columbia,
Canada V1Y 2E6
All Executive Officers
and Directors 304,000 60.8
EXECUTIVE COMPENSATION
Compensation of Executive Officers
None of our officers and/or directors receive any compensation for
their respective services rendered unto the Company, nor have they received such
compensation in the past. They all have agreed to act without compensation until
authorized by the Board of Directors, which is not expected to occur until the
we have generated revenues from operations after consummation of a merger or
acquisition. As of the date of this registration statement, the Company has no
funds available to pay directors. Further, none of the directors are accruing
any compensation pursuant to any agreement with the Company.
PROPOSAL NUMBER 2
APPROVAL OF INDEPENDENT AUDITORS
The Board of Directors has selected Cordovano & Harvey, P.C.
("Cordovano & Harvey") as the independent auditors for the Company for the
fiscal year ending June 30, 2000.
On January 19, 2000, the Company was informed by J.D. Kish, CPA, the
engagement partner responsible for the Company's audit, that Kish, Leake &
Associates, P.C. ("Kish, Leake") was resigning. On January 21, 2000, the Company
retained the firm of Cordovano & Harvey, P.C. as its new auditors. The Board of
Directors made this determination after receiving a recommendation from Kish,
Leake.
72
The report of Kish, Leake & Associates, P.C. on the financial
statements of the Company did not contain an adverse opinion or a disclaimer of
opinion, and was not qualified or modified as to uncertainty, audit scope or
accounting principles. The Company has had no disagreements with its former
principal accountants on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure which
disagreements, if not resolved to the satisfaction of the former principal
accountants, would have caused it to make reference to the subject matter of the
disagreements in connection with its report relating to its audit for the
Company.
It is not anticipated that representatives of Cordovano & Harvey or
Kish, Leake will be present at the Annual Meeting. If representatives are
present, they will be provided an opportunity to make a statement should they
wish to do so and to respond to appropriate questions.
The Board of Directors recommends a vote "FOR" approval of Cordovano &
Harvey as the Company's independent auditors for the fiscal year ending June 30,
2000.
PROPOSAL NUMBER 3
APPROVAL OF OUTSIDE COUNSEL
The Board of Directors has selected Foley & Lardner as the outside
counsel.
On July 15, 2000, the Company was informed by Antoine M. Devine, Esq.,
the engagement partner responsible for the Company's legal representation, that
Evers & Hendrickson, LLP was dissolving, and that the Corporate/Securities
Department was moving to Foley & Lardner. On August 1, 2000, the Company
retained the firm of Foley & Lardner as its new outside counsel.
It is not anticipated that representatives of Foley & Lardner or Evers
& Hendrickson, LLP will be present at the Annual Meeting. If representatives are
present, they will be provided an opportunity to make a statement should they
wish to do so and to respond to appropriate questions.
The Board of Directors recommends a vote "FOR" approval of Foley &
Lardner as the Company's outside counsel.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR
2001 ANNUAL MEETING OF SHAREHOLDERS
The 2001 Annual Meeting of Shareholders has been scheduled to take
place on August 25, 2001. Shareholder proposals for presentation at that meeting
must be received by the Company by no later than May 15, 2001.
73
OTHER BUSINESS
It is not intended that any business other than that set forth in the
Notice of Annual Meeting and more specifically described in this Proxy Statement
will be brought before the Annual Meeting. If any other business should properly
come before the Annual Meeting, it is the intention of the persons named in the
enclosed form of proxy to vote in accordance with their best judgment on that
business or any matters dealing with the conduct of the Annual Meeting pursuant
to the discretionary authority granted in the proxy.
November 10, 2000 By Order of the Board of Directors,
/s/ Christine Cerisse
-------------------------------
Christine Cerisse,
President
Upon written request of any person whose proxy is being solicited hereby, the
Company will provide without charge a copy of the Company's Annual Report on
Form 10-KSB for the year ended June 30, 2000, which was filed with the
Securities and Exchange Commission under the Securities Exchange Act of 1934,
including the financial statements and schedules thereto, but without exhibits.
All such requests may be directed to: Christine Cerisse, President, Express
Investments Associates, Inc., Suite 104-1456 St. Paul St., Kelowna, British
Columbia, Canada V1Y 2E6.
74
FINANCIAL STATEMENTS
UNITED MANAGEMENT, INC.
The following financial statements are attached to this report and
filed as a part of this Registration Statement.
Independent Auditor's Report...............................................F-2-3
Balance Sheet as of June 30, 2000............................................F-4
Statement of Operations as of June 30, 2000..................................F-5
Statement of Cash Flows as of June 30, 2000..................................F-6
Statement of Shareholders' Equity as of June 30,2000.........................F-7
Notes to Financial Statements as of June 30, 2000............................F-8
Balance Sheet as of September 30, 2000......................................F-14
Statement of Operations and Deficit as of September 30, 2000................F-15
Statement of Cash Flows as of September 30, 2000............................F-16
Statement of Shareholders' Equity as of September 30, 2000..................F-17
Notes to Financial Statements as of September 30, 2000......................F-18
Balance Sheet as of December 31, 2000.......................................F-20
Statement of Operations and Deficit as of December 31, 2000.................F-21
Statement of Cash Flows as of December 31, 2000.............................F-22
Statement of Shareholders' Equity as of December 31, 2000...................F-23
Notes to Financial Statements as of December 31, 2000.......................F-24
Balance Sheet as of March 31, 2001..........................................F-27
Statement of Operations and Deficit as of March 31, 2001....................F-28
Statement of Cash Flows as of March 31, 2001................................F-29
Statement of Shareholders' Equity as of March 31, 2001......................F-30
Notes to Financial Statements as of March 31, 2001..........................F-31
FINANCIAL STATEMENTS
RRUN VENTURES, INC.
The following financial statements are attached to this report and
filed as a part of this Registration Statement.
Independent Auditor's Report................................................F-34
Consolidated Balance Sheet as of December 31, 2000..........................F-35
Consolidated Statement of Operations as of December 31, 2000................F-36
Consolidated Statement of Cash Flows as of December 31, 2000................F-37
Consolidated Statement of Stockholders' Equity as of December 31, 2000......F-38
Notes to Consolidated Financial Statements as of December 31, 2000..........F-39
Balance Sheet as of March 31, 2001..........................................F-43
Statement of Operations and Deficit as of March 31, 2001....................F-44
Statement of Cash Flows as of March 31, 2001................................F-45
Statement of Shareholders' Deficiency as of March 31, 2001..................F-46
Notes to Financial Statements as of March 31, 2001..........................F-47
UNAUDITED PRO FORMA FINANCIAL DATA
Introduction to Pro Forma Consolidated Financial Statements.................F-52
Pro Forma Consolidated Balance Sheet........................................F-53
Pro Forma Consolidated Statement of Operations as of June 30, 2000..........F-54
Pro Forma Consolidated Statement of Operations as of March 31, 2001.........F-55
Notes to Pro Forma Consolidated Financial Statements........................F-56
F-1
To the Board of Directors and Shareholders
United Management, Inc.
Independent Auditors' Report
We have audited the balance sheet of United Management, Inc. (a development
stage company) as of June 30, 2000 and the related statements of operations,
shareholders' equity and cash flows for the year ended June 30, 2000. 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 audit.
We conducted our audit 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 audit provides 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 United Management, Inc. as of
June 30, 2000, and the related statements of operations and cash flows for the
year ended June 30, 2000 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note A to the financial
statements, the Company has a substantial dependence on the success of its
development stage activities, significant losses since inception, lack of
liquidity, and a working capital deficiency at June 30, 2000. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans regarding those matters are also described in Note
A. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Cordovano and Harvey, P.C
Denver, Colorado
July 17, 2000
F-2
Independent Auditors' Report
We have audited the accompanying balance sheet of United Management, Inc. (a
development stage company) as of June 30, 1999 (not separately included herein)
and the related statements of income, shareholders' deficit, and cash flows for
the fiscal year ended June 30, 1999. 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 audit.
We conducted our audit 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 audit provides 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 United Management, Inc. at June
30, 1999, and the results of its operations and cash flows for the fiscal year
ended June 30, 1999 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 5 (not separately
included herein), the Company is in the development stage and has no operations
as of June 30, 1999. The deficiency in working capital as of June 30, 1999
raises substantial doubt about its ability to continue as a going concern.
Management's plans concerning these matters are described in Note 5 (not
separately included herein). The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
Kish, Leake, and Associates, P.C.
Certified Public Accountants
Englewood, Colorado
August 24, 1999
F-3
UNITED MANAGEMENT, INC.
(A Development Stage Company)
BALANCE SHEET
June 30, 2000
ASSETS
TOTAL ASSETS $ -
========
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
LIABILITIES
Accounts payable and accrued liagilities ......................... $ 3,235
--------
TOTAL LIABILITIES 3,235
--------
SHAREHOLDERS' (DEFICIT)
Common stock, $.0001 par value, 100,000,000 shares
authorized, 500,000 shares issued and outstanding ............... 50
Additional paid-in capital ....................................... 15,670
Deficit accumulated during the development stage ................. (18,955)
--------
TOTAL SHAREHOLDERS' (DEFICIT) (3,235)
--------
$ -
========
See accompanying notes to financial statements
F-4
UNITED MANAGEMENT, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
January 29,
1997
Year Ended (inception)
-------------------- Through
June 30, June 30, June 30,
2000 1999 2000
-------- -------- -----------
(unaudited)
COSTS AND EXPENSES
Legal fees ........................ $ 8,421 $ - $ 8,421
Accounting fees ................... 2,233 1,623 3,856
Licenses and fees ................. 253 350 603
Printing costs ................... 6,025 - 6,025
Stock-based compensation for
organizational costs (Note B) .... - - 50
-------- -------- --------
LOSS FROM OPERATIONS (16,932) (1,973) (18,955)
-------- -------- --------
INCOME TAX BENEFIT (EXPENSE) (NOTE C)
Current tax benefit ............... 3,223 376 3,609
Deferred tax expense .............. (3,223) (376) (3,609)
-------- -------- --------
NET LOSS $(16,932) $ (1,973) $(18,955)
======== ======== ========
BASIC AND DILUTED
LOSS PER COMMON SHARE ............ $ (0.03) $ * $ (0.04)
======== ======== ========
BASIC AND DILUTED WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING ........ 500,000 500,000 500,000
======== ======== ========
* Less than .01 per share
See accompanying notes to financial statements
F-5
UNITED MANAGEMENT, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
January 29,
1997
Year Ended (inception)
-------------------- Through
June 30, June 30, June 30,
2000 1999 2000
-------- -------- -----------
(unaudited)
OPERATING ACTIVITIES
Net loss ............................. $(16,932) $ (1,973) $(18,955)
Non-cash transactions:
Stock-based compensation for
organizational costs (Note B) ..... - - 50
Third party expenses paid by
affiliate on behalf of the company,
recorded as additional-paid-in
capital ............................. 15,670 - 15,670
Changes in operating assets and
liabilities:
Accounts payable and accrued
liabilities ....................... 1,262 1,973 3,235
-------- -------- --------
NET CASH (USED IN)
OPERATING ACTIVITIES $ - $ - $ -
-------- -------- --------
NET CASH PROVIDED BY
FINANCING ACTIVITIES - - -
-------- -------- --------
NET CHANGE IN CASH - - -
Cash, beginning of period ............. - - -
-------- -------- --------
CASH, END OF PERIOD $ - $ - $ -
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ............................. $ - $ - $ -
======== ======== ========
Income taxes ......................... $ - $ - $ -
======== ======== ========
Non-cash financing activities:
500,000 shares common stock
issued for services ................. $ - $ - $ 50
======== ======== ========
See accompanying notes to financial statements
F-6
UNITED MANAGEMENT, INC.
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
January 29, 1997 (inception) through June 30, 2000
Deficit
Accumulated
Preferred Stock Common Stock Additional During
--------------- ---------------- Paid-In Development
Shares Amount Shares Amount Capital Stage Total
------ ------ ------- ------ ------- ----------- --------
Beginning balance, January 29, 1997 - $ - - $ - $ - $ - $ -
Common stock issued in exchange
for organization costs ................ - - 500,000 50 - - 50
Net loss for the period ended
March 31, 1997 ........................ - - - - (50) (50)
------ ------ ------- ------ ------- -------- --------
BALANCE, JUNE 30, 1997 - - 500,000 50 - (50) -
Net loss for year ended June 30, 1998 .. - - - - - - -
------ ------ ------- ------ ------- -------- --------
BALANCE, JUNE 30, 1998 - - 500,000 50 - (50) -
Net loss for year ended June 30, 1999 .. - - - - - (1,973) (1,973)
------ ------ ------- ------ ------- -------- --------
BALANCE, JUNE 30, 1999 - - 500,000 50 - (2,023) (1,973)
Third party expenses paid by an
affiliate on behalf of the Company .... - - - - 15,670 - 15,670
Net loss for year ended June 30, 2000 .. - - - - - (16,932) (16,932)
------ ------ ------- ------ ------- -------- --------
BALANCE, JUNE 30, 2000 - $ - 500,000 $ 50 $15,670 $(18,955) $ (3,235)
====== ====== ======= ====== ======= ======== ========
See accompanying notes to financial statements.
F-7
UNITED MANAGEMENT, INC.
(A Development Stage Company)
Notes to Financial Statements
Note A: Organization and summary of significant accounting policies
Organization
United Management, Inc. (the "Company") was incorporated under the laws of
Nevada on January 29, 1997 to engage in any lawful corporate undertaking,
including, but not limited to, selected mergers and acquisitions. The Company is
a development stage enterprise in accordance with Statement of Financial
Accounting Standard (SFAS) No. 7.
The Company has been in the development stage since inception and has no
operations to date.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the accompanying
financial statements, the Company is a development stage company with no revenue
as of June 30, 2000 and has incurred losses of $(16,932), $(1,973) and $(18,955)
for the years ended June 30, 2000 and 1999 and for the period January 29, 1997
(inception) through June 30, 2000, respectively. The Company has no operating
history or revenue, no assets, and continuing losses which the Company expects
will continue for the foreseeable future. These factors among others may
indicate that the Company will be unable to continue as a going concern for a
reasonable period of time. An affiliate of the Company plans to continue
advancing funds on an as needed basis and in the longer term, revenues from the
operations of a merger candidate, if found. The Company's continuation as a
going concern is dependent upon continuing capital advances from an affiliate
and commencing operations or locating and consummating a business combination
with an operating company. There is no assurance that the affiliate will
continue to provide capital to the Company or that the Company can commence
operations or identify such a target company and consummate such a business
combination. These factors, among others, raise substantial doubt about its
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Summary of significant accounting policies
Cash equivalents
The Company's financial instruments consist of accounts payable and accrued
liabilities. For financial accounting purposes and the statement of cash flows,
cash equivalents include all highly liquid debt instruments purchased with an
original maturity of three months or less.
F-8
UNITED MANAGEMENT, INC.
(A Development Stage Company)
Notes to Financial Statements
Note A: Organization and summary of significant accounting policies, continued
Use of estimates
The preparation of the financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities;
disclosure of contingent assets and liabilities at the date of the financial
statements; and the reported amounts of revenues and expenses during the
reporting period. Accordingly, actual results could differ from those estimates.
Income Taxes
The Company reports income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes", which requires the liability method in accounting for income
taxes. Deferred tax assets and liabilities arise from the difference between the
tax basis of an asset or liability and its reported amount on the financial
statements. Deferred tax amounts are determined by using the tax rates expected
to be in effect when the taxes will actually be paid or refunds received, as
provided under currently enacted law. Valuation allowances are established when
necessary to reduce the deferred tax assets to the amounts expected to be
realized. Income tax expense or benefit is the tax payable or refundable,
respectively, for the period plus or minus the change during the period in the
deferred tax assets and liabilities.
Loss per common share
The Company has adopted Statement of Financial Accounting Standards No. 128
("SFAS 128") which requires the disclosure of basic and diluted earnings per
share. Basic earnings per share is calculated using income available to common
shareowners divided by the weighted average of common shares outstanding during
the year. Diluted earnings per share is similar to basic earnings per share
except that the weighted average of common shares outstanding is increased to
include the number of additional common shares that would have been outstanding
if the dilutive potential common shares, such as options, had been issued. The
Company has a simple capital structure and no outstanding options at June 30,
2000. Therefore, dilutive earnings per share are not applicable and accordingly
have not been presented
Fiscal year
The Company operates on a fiscal year ending on June 30.
F-9
UNITED MANAGEMENT, INC.
(A Development Stage Company)
Notes to Financial Statements
Note A: Organization and summary of significant accounting policies, continued
Stock based compensation
SFAS No. 123, "Accounting for Stock-Based Compensation" was issued in October
1995. This accounting standard permits the use of either a fair value based
method or the method defined in Accounting Principles Board Opinion 25,
"Accounting for Stock Issued to Employees" ("APB 25") to account for stock-based
compensation arrangements. Companies that elect to use the method provided in
APB 25 are required to disclose pro forma net income and earnings per share that
would have resulted from the use of the fair value based method. The Company has
elected to continue to determine the value of stock-based compensation
arrangements under the provisions of APB 25. For stock issued to officers the
fair value approximates the intrinsic value. Therefore, no pro forma disclosures
are presented.
Fair value of financial instruments
SFAS 107, "Disclosure About Fair Value of Financial Instruments," requires
certain disclosures regarding the fair value of financial instruments. The
Company has determined, based in available market information and appropriate
valuation methodologies, the fair value of its financial instruments
approximates carrying value. The carrying amounts of cash, accounts payable, and
other accrued liabilities approximate fair value due to the short-term maturity
of the instruments.
Recently issued accounting pronouncements
The Company has adopted the following new accounting pronouncements for the year
ended June 30, 2000. There was no effect on the financial statements presented
from the adoption of the new pronouncements.
Statement of Financial Accounting Standard ("SFAS") No. 130, "Reporting
Comprehensive Income," requires the reporting and display of total comprehensive
income and its components in a full set of general-purpose financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is based on the "management" approach for reporting segments. The
management approach designates the internal organization that is used by
management for making operating decisions and assessing performance as the
source of the Company's reportable segments. SFAS No. 131 also requires
disclosure about the Company's products, the geographic areas in which it earns
revenue and holds long-lived assets, and its major customers.
SFAS No. 132, "Employers' Disclosures about Pensions and Other Post-retirement
Benefits," which requires additional disclosures about pension and other
post-retirement benefit plans, but does not change the measurement or
recognition of those plans.
F-10
UNITED MANAGEMENT, INC.
(A Development Stage Company)
Notes to Financial Statements
Note A: Organization and summary of significant accounting policies, concluded
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including derivative instruments
embedded in other contracts, and for hedging activities. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
This statement is not expected to affect the Company as the Company currently
does not have any derivative instruments or hedging activities.
In June 1999, the FASB issued SFAS No. 137, which amended the implementation
date for SFAS No. 133 to be effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000.
Statement of Position ("SOP") 98-1 "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This SOP requires that
entities capitalize certain internal-use software costs once certain criteria
are met.
SOP 98-5, "Reporting on the Costs of Start-Up Activities." Sop 98-5 provides,
among other things, guidance on the reporting of start-up costs and organization
costs. It requires costs of start-up activities and organization costs to be
expensed as incurred.
The Company will continue to review these new accounting pronouncements over
time to determine if any additional disclosures are necessary based on evolving
circumstances.
Note B: Related party transactions
The Company maintains a mailing address at an affiliate's address. This address
is Suite 106, 1456 St. Paul Street, Kelowna, B.C., Canada, V1Y 2E6. At this time
the Company has no need for an office.
The Company has issued an officer 500,000 shares of common stock in exchange for
services related to management and organization costs of $50.00. The officer
will provide administrative and marketing services as needed. The officer may,
from time to time, advance to the Company any additional funds that the Company
needs for costs in connection with searching for or completing an acquisition or
merger.
The Company does not maintain a checking account and all expenses incurred by
the Company have historically been paid by an affiliate. Since inception the
Company incurred $18,995 in expenses of which $15,670 were paid by an affiliate.
The affiliate does not expect to be repaid for the expenses it pays on behalf of
the Company. Accordingly, as the expenses are paid, they are classified as
additional-paid-in capital.
F-11
UNITED MANAGEMENT, INC.
(A Development Stage Company)
Notes to Financial Statements
Note C: Income taxes
(a)
(b) A reconciliation of U.S. statutory federal income tax rate to the
effective rate for the period from January 30, 1997 (inception) through June 30,
2000 is as follows:
January 30,
1997
(inception)
Year Ended Year Ended Through
June 30, June 30, June 30,
2000 1999 2000
---------- ---------- -----------
U.S. statutory federal rate ...... 15.00% 15.00% 15.00%
State income tax rate, net
of federal benefit .............. 4.04% 4.04% 4.04%
Net operating loss (NOL) for
which no tax benefit is
currently available ............. -19.04% -19.04% -19.04%
------- ------- -------
0.00% 0.00% 0.00%
======= ======= =======
The valuation allowance offsets the net deferred tax asset for which there is no
assurance of recovery. The change in the valuation allowance for the years ended
June 30, 2000 and 1999 was $2,848 and $366, respectively. The change in the
valuation allowance for the period from January 29, 1997 (inception) through
June 30, 2000 was $3,609. NOL carryforwards at June 30, 2000 will begin to
expire in 2012. The valuation allowance will be evaluated at the end of each
year, considering positive and negative evidence about whether the asset will be
realized. At that time, the allowance will either be increased or reduced;
reduction could result in the complete elimination of the allowance if positive
evidence indicates that the value of the deferred tax asset is no longer
impaired and the allowance is no longer required.
Should the Company undergo an ownership change, as defined in Section 382 of the
Internal Revenue Code, the Company's tax net operating loss carryforwards
generated prior to the ownership change will be subject to an annual limitation
which could reduce or defer the utilization of those losses.
F-12
UNITED MANAGEMENT, INC.
(A Development Stage Company)
Notes to Financial Statements
Note D: Shareholders' equity
Common Stock
The Company initially authorized 25,000 shares of $1.00 par value common stock.
On January 29, 1997 the Board of Directors approved an increase in authorized
shares to 100,000,000 and changed the par value to $.0001. On January 29, 1997
the Company issued 500,000 shares of common stock for services valued at $.0001
per share. The shares were valued nominally at $50 as there was no market price
for the Company's common stock as of the date of issuance.
Note D: Shareholders' equity, concluded
On June 25, 1999 the Company filed amended articles with the state of Nevada to
change the authorized shares of common stock originally approved by the Board of
Directors on January 29, 1997 from 25,000, no par value to 100,000,000, $.0001
par. Nevada Revised Statutes Section 78.385 (c) treats this amendment as if it
was filed on January 29, 1997, therefore, giving the Company enough shares for
the original issuance of 500,000 shares of common stock.
F-13
UNITED MANAGEMENT, INC.
(A Development Stage Company)
BALANCE SHEET
(Stated in U.S. Dollars)
--------------------------------------------------------------------------------
SEPTEMBER 30 JUNE 30
2000 2000
--------------------------------------------------------------------------------
ASSETS $ - $ -
================================================================================
LIABILITIES
Current
Accounts payable and accrued liabilities $ 1,699 $ 3,235
Loans payable 10,790 -
--------------------------
12,489 3,235
--------------------------
ShareHOLDERS' DEFICIENCY
Share Capital
Authorized:
100,000,000 common shares, par
value $0.0001 per share
Issued and outstanding:
500,000 common shares 50 50
Additional paid in capital 15,670 15,670
Deficit (28,209) (18,955)
--------------------------
(12,489) (3,235)
--------------------------
$ - $ -
================================================================================
F-14
UNITED MANAGEMENT, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS AND DEFICIT
(Stated in U.S. Dollars)
--------------------------------------------------------------------------------
INCEPTION
JANUARY 29
THREE MONTHS ENDED 1997 TO
SEPTEMBER 30 SEPTEMBER 30
2000 1999 2000
--------------------------------------------------------------------------------
Expenses
Office and sundry $ 2,127 $ 2,415 $ 8,755
Professional fees 7,127 3,487 19,404
Stock based compensation
for organizational costs - - 50
------------------------------------------------
Net Loss For The Period 9,254 5,902 $ 28,209
=================
Deficit, Beginning Of Period 18,955 50
-----------------------------
Deficit, End Of Period $ 28,209 $ 5,952
=============================================================
Net Loss Per Share $ (0.02) $ (0.01)
=============================================================
Weighted Average Number of
Shares Outstanding 500,000 500,000
=============================================================
F-15
UNITED MANAGEMENT, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Stated in U.S. Dollars)
--------------------------------------------------------------------------------
INCEPTION
JANUARY 29
THREE MONTHS ENDED 1997 TO
SEPTEMBER 30 SEPTEMBER 30
2000 1999 2000
--------------------------------------------------------------------------------
Cash Flow From Operating Activities
Net loss for the period $ (9,254) $ (5,902) $(28,209)
Non-cash transactions:
Stock-based compensation
for organizational costs - - 50
Third party expenses paid
by affiliate on behalf of
the Company, recorded as
additional paid-in capital - - 15,670
Adjustments To Reconcile Net Loss
To Net Cash Used By Operating
Activities
Accounts payable and
accrued liabilities (1,536) 4,214 1,699
Loans payable 10,790 1,688 10,790
---------------------------------------------
- - -
---------------------------------------------
Change In Cash - - -
Cash, Beginning Of Period - - -
---------------------------------------------
Cash, End Of Period $ - $ - $ -
================================================================================
F-16
UNITED MANAGEMENT, INC.
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS EQUITY
SEPTEMBER 30, 2000
(Stated in U.S. Dollars)
ADDITIONAL
PAID-IN
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------------------------------------------------------
Shares Issued For Cash
At $0.0001 500,000 $ 50 $ - $ (50) $ -
------------------------------------------------------
Balance, June 30, 1997
And 1998 500,000 50 - (50) -
Loss For The Year - - - (1,973) (1,973)
------------------------------------------------------
Balance, June 30, 1999 500,000 50 - (2,023) (1,973)
Third Party Expenses
Paid By Affiliate On
Behalf Of The Company,
Recorded As Additional
Paid-In Capital - - 15,670 - 15,670
Loss For The Year - - - (16,932) (16,932)
------------------------------------------------------
Balance, June 30, 2000 500,000 50 15,670 (18,955) (3,235)
Loss For The Period - - - (9,254) (9,254)
------------------------------------------------------
Balance, September 30,
2000 500,000 $ 50 $15,670 $(28,209) $(12,489)
======================================================
F-17
UNITED MANAGEMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Stated in U.S. Dollars)
1. BASIS OF PRESENTATION
The unaudited financial statements as of September 30, 2000 included herein
have been prepared without audit pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with United States generally accepted principles have been
condensed or omitted pursuant to such rules and regulations. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. It is
suggested that these financial statements be read in conjunction with the
June 30, 2000 audited financial statements and notes thereto.
2. NATURE OF OPERATIONS
a) Organization
The Company was incorporated in the State of Nevada, U.S.A. on January
29, 1997.
b) Development Stage Activities
The Company has been in the development stage since inception and has
no operations to date.
3. SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared in accordance
with generally accepted accounting principles in the United States. Because
a precise determination of many assets and liabilities is dependent upon
future events, the preparation of financial statements for a period
necessarily involves the use of estimates which have been made using
careful judgement.
The financial statements have, in management's opinion, been properly
prepared within reasonable limits of materiality and within the framework
of the significant accounting policies summarized below:
a) Development Stage Company
The Company is a developed stage company as defined in the Statements
of Financial Accounting Standards No. 7. The Company is devoting
substantially all of its present efforts to establish a new business
and none of its planned principal operations have commenced. All
losses accumulated since inception have been considered as part of the
Company's development stage activities.
b) Income Taxes
The Company has adopted Statement of Financial Accounting Standards
No. 109 - "Accounting for Income Taxes" (SFAS 109). This standard
requires the use of an asset and liability approach for financial
accounting and reporting on income taxes. If it is more likely than
not that some portion or all if a deferred tax asset will not be
realized, a valuation allowance is recognized.
F-18
UNITED MANAGEMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Stated in U.S. Dollars)
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
c) Financial Instruments
The Company's financial instruments consist of accounts payable.
Unless otherwise noted, it is management's opinion that this Company
is not exposed to significant interest or credit risks arising from
these financial instruments. The fair value of these financial
instruments approximate their carrying values, unless otherwise noted.
d) Net Loss Per Share
Net loss per share is based on the weighted average number of common
shares outstanding during the period plus common share equivalents,
such as options, warrants and certain convertible securities. This
method requires primary earnings per share to be computed as if the
common share equivalents were exercised at the beginning of the period
or at the date of issue and as if the funds obtained thereby were used
to purchase common shares of the Company at its average market value
during the period.
4. NEW ACCOUNTING STANDARDS
a) Effective December 15, 1995, Statement of Financial Accounting
Standards No. 123 ("SFAS-123") "Accounting for Stock-based
Compensation" was adopted for United States GAAP purposes. SFAS-123
enables a company to elect to adopt a fair value methodology for
accounting for stock based compensation. The Company has determined
that the fair value of stock options is similar to the issue price at
the time of granting. The Company does not expect to elect to adopt
the fair value methodology, although the pro forma results of
operations and earnings per share determined as if the fair value
methodology had been applied will be disclosed as required under
SFAS-123 in future years.
b) In March, 1995, Statement of Financial Accounting Standards No. 121
(SFAS-121) "Accounting for Impairment of long-lived assets and for
long-lived assets to be disposed of" was issued. Certain long-lived
assets held by the Company must be reviewed for impairment whenever
events or changes in circumstances indicate the carrying amount of an
asset may not be recoverable. Accordingly, the impairment loss is
recognized in the period it is determined. The Company has adopted
these standards. There was no material effect on its financial
position or results of operations of the Company from its adoption.
F-19
F-20
UNITED MANAGEMENT, INC.
(A Development Stage Company)
BALANCE SHEET
(Stated in U.S. Dollars)
--------------------------------------------------------------------------------
DECEMBER 31 JUNE 30
2000 2000
--------------------------------------------------------------------------------
ASSETS
Restricted Cash (Note 4) $ 115,368 $ -
================================================================================
LIABILITIES
Current
Accounts payable and accrued liabilities $ 23,504 $ 3,235
Loans payable 13,106 -
---------------------------------
36,610 3,235
Common Shares Subject To Reconfirmation
(Note 4) 115,368 -
---------------------------------
151,978 3,235
---------------------------------
ShareHOLDERS' DEFICIENCY
Share Capital (Note 4)
Authorized:
100,000,000 common shares,
par value $0.0001 per share
Issued and Outstanding:
500,000 common shares at December 31,
2000 and at June 30, 2000 50 50
Additional paid in capital 15,670 15,670
Deficit (52,330) (18,955)
---------------------------------
(36,610) (3,235)
---------------------------------
$ 115,368 $ -
================================================================================
F-20
UNITED MANAGEMENT, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS AND DEFICIT
(Stated in U.S. Dollars)
-------------------------------------------------------------------------------------------
INCEPTION
JANUARY 29
THREE MONTHS ENDED SIX MONTHS ENDED 1997 TO
DECEMBER 31 DECEMBER 31 DECEMBER 31
2000 1999 2000 1999 2000
-------------------------------------------------------------------------------------------
Expenses
Office and sundry $ 2,315 $ 677 $ 4,443 $ 3,092 $ 11,070
Professional fees 21,806 1,758 28,932 5,245 41,210
Stock based compensation
for organizational costs - - - - 50
-------------------------------------------------------------------------------------------
Net Loss For The Period 24,121 2,435 33,375 8,337 $ 52,330
========
Deficit, Beginning Of Period 28,209 5,952 18,955 50
-----------------------------------------------------------------------------
Deficit, End Of Period 52,330 8,387 $ 52,330 $ 8,387
=============================================================================
Net Loss Per Share $ (0.04) $ (0.01) $ (0.06) $ (0.01)
=============================================================================
Weighted Average Number
Of Shares Outstanding 597,185 500,000 548,593 500,000
=============================================================================
F-21
UNITED MANAGEMENT, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Stated in U.S. Dollars)
-------------------------------------------------------------------------------------------
INCEPTION
JANUARY 29
THREE MONTHS ENDED SIX MONTHS ENDED 1997 TO
DECEMBER 31 DECEMBER 31 DECEMBER 31
2000 1999 2000 1999 2000
-------------------------------------------------------------------------------------------
Cash Flow From Operating
Activities
Net loss for the period $(24,121) $ (2,435) $(33,375) $ (8,337) $(52,330)
Non-cash transactions:
Stock-based compensation
for organizational costs - - - - 50
Third party expenses paid
by affiliate on behalf
of the Company, recorded
as additional paid-in
capital - 7,812 - 7,812 15,670
Adjustments To Reconcile Net
Loss To Net Cash Used By
Operating Activities
Accounts payable and
accrued liabilities 21,805 (3,689) 20,269 525 23,504
Loans payable 2,316 (1,688) 13,106 - 13,106
-------------------------------------------------------------------------------------------
- - - - -
-------------------------------------------------------------------------------------------
Cash Flow From Financing
Activities
Common stock subject to
reconfirmation 115,368 - 115,368 - 115,368
-------------------------------------------------------------------------------------------
Change In Cash 115,368 - 115,368 - 115,368
Cash, Beginning Of Period - - - - -
-------------------------------------------------------------------------------------------
Cash, End Of Period $115,368 $ - $115,368 $ - $115,368
===========================================================================================
F-22
UNITED MANAGEMENT, INC.
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' DEFICIENCY
DECEMBER 31, 2000
(Stated in U.S. Dollars)
ADDITIONAL
PAID-IN
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------------------------------------------------------
Shares Issued For Cash
At $0.0001 500,000 $ 50 $ - $ (50) $ -
------------------------------------------------------
Balance, June 30, 1997
And 1998 500,000 50 - (50) -
Loss For The Year - - - (1,973) (1,973)
------------------------------------------------------
Balance, June 30, 1999 500,000 50 - (2,023) (1,973)
Third Party Expenses
Paid By Affiliate On
Behalf Of The Company,
Recorded As Additional
Paid-In Capital - - 15,670 - 15,670
Loss For The Year - - - (16,932) (16,932)
------------------------------------------------------
Balance, June 30, 2000 500,000 50 15,670 (18,955) (3,235)
Loss For The Period - - - (33,375) (33,375)
------------------------------------------------------
Balance, December 31,
2000 500,000 $ 50 $15,670 $(52,330) $(36,610)
======================================================
F-23
UNITED MANAGEMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Stated in U.S. Dollars)
1. BASIS OF PRESENTATION
The unaudited financial statements as of December 31, 2000 included herein
have been prepared without audit pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with United States generally accepted principles have been
condensed or omitted pursuant to such rules and regulations. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. It is
suggested that these financial statements be read in conjunction with the
June 30, 2000 audited financial statements and notes thereto.
2. NATURE OF OPERATIONS
a) Organization
The Company was incorporated in the State of Nevada, U.S.A. on January
29, 1997.
b) Development Stage Activities
The Company has been in the development stage since inception and has
no operations to date.
3. SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared in accordance
with generally accepted accounting principles in the United States. Because
a precise determination of many assets and liabilities is dependent upon
future events, the preparation of financial statements for a period
necessarily involves the use of estimates which have been made using
careful judgement.
The financial statements have, in management's opinion, been properly
prepared within reasonable limits of materiality and within the framework
of the significant accounting policies summarized below:
a) Development Stage Company
The Company is a development stage company as defined in the
Statements of Financial Accounting Standards No. 7. The Company is
devoting substantially all of its present efforts to establish a new
business and none of its planned principal operations
F-24
have commenced. All losses accumulated since inception have been
considered as part of the Company's development stage activities.
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of
revenues and expenses for the reporting period. Actual results could
differ from these estimates.
c) Income Taxes
The Company has adopted Statement of Financial Accounting Standards
No. 109 - "Accounting for Income Taxes" (SFAS 109). This standard
requires the use of an asset and liability approach for financial
accounting and reporting on income taxes. If it is more likely than
not that some portion or all if a deferred tax asset will not be
realized, a valuation allowance is recognized.
d) Financial Instruments
The Company's financial instruments consist of accounts payable and
accrued liabilities, and loans payable.
Unless otherwise noted, it is management's opinion that this Company
is not exposed to significant interest or credit risks arising from
these financial instruments. The fair value of these financial
instruments approximate their carrying values, unless otherwise noted.
e) Net Loss Per Share
Net loss per share is based on the weighted average number of common
shares outstanding during the period plus common share equivalents,
such as options, warrants and certain convertible securities. This
method requires primary earnings per share to be computed as if the
common share equivalents were exercised at the beginning of the period
or at the date of issue and as if the funds obtained thereby were used
to purchase common shares of the Company at its average market value
during the period.
4. SHARE CAPITAL
In December 2000, the Company completed an initial public offering of
288,420 common shares at $0.40 per share for cash proceeds of $115,368. The
proceeds of the offering and the common shares issued pursuant thereto are
being held in an escrow account, and shall remain in the escrow account
until an acquisition meeting specific criteria is completed. Before the
acquisition can be completed, and before the deposited funds and deposited
securities can be released to the Company and the investors, respectively,
the Company is required to update its registration statement with a
post-effective amendment, and within five business days after the effective
date thereof, the Company is required to furnish the investors with the
prospectus produced thereby containing the terms of a reconfirmation offer
and information regarding the proposed acquisition candidate and its
business. Investors must have no fewer than 20 and no more than 45 business
days from the effective date of the post-effective amendment to decide to
reconfirm their investment and remain an
F-25
investor or, alternately, require the return of their investment. Each
investor shall have 20 business days from the date of this prospectus to
reconfirm their investment. Any investor not making any decision within the
20 business day period will automatically have their investment returned.
If the Company does not complete an acquisition meeting the specified
criteria within 18 months of the effective date of its initial public
offering, all of the deposited funds in the escrow account must be returned
to investors.
5. ACQUISITION AGREEMENT
In December 2000, the Company executed an agreement with RRUN Ventures
Inc., a private Nevada corporation, and its shareholders to acquire all of
the issued and outstanding common shares of RRUN Ventures Inc. in exchange
for 305,439 of the Company's common shares. Consummation of this
transaction is conditional, among other things, upon the acceptance of the
reconfirmation offer by the holders of at least 80% of the common shares
subscribed for in the initial public offering described in Note 4.
F-26
UNITED MANAGEMENT, INC.
(A Development Stage Company)
BALANCE SHEET
(Stated in U.S. Dollars)
-------------------------------------------------------- --------- ---------
MARCH 31 JUNE 30
2001 2000
-------------------------------------------------------- --------- ---------
ASSETS
Restricted Cash (Note 4) $ 116,438 $ --
======================================================== ========= =========
LIABILITIES
Current
Accounts payable and accrued liabilities $ 58,690 $ 3,235
Loans payable 13,106 --
--------- ---------
71,796 3,235
Common Shares Subject To Reconfirmation (Note 4) 115,368 --
--------- ---------
187,164 3,235
--------- ---------
ShareHOLDERS' DEFICIENCY
Share Capital (Note 4)
Authorized:
100,000,000 common shares, par value
$0.0001 per share
Issued and Outstanding:
500,000 common shares at March 31, 2001
and at June 30, 2000 50 50
Additional paid in capital 15,670 15,670
Deficit (86,446) (18,955)
--------- ---------
(70,726) (3,235)
--------- ---------
$ 116,438 $ --
======================================================== ========= =========
F-27
UNITED MANAGEMENT, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS AND DEFICIT
(Stated in U.S. Dollars)
------------------------------------------------- -------------------------------- -------------------------------- ----------------
INCEPTION
JANUARY 29
THREE MONTHS ENDED NINE MONTHS ENDED 1997 TO
MARCH 31 MARCH 31 MARCH 31
2001 2000 2001 2000 2001
------------------------------------------------- ---------------- --------------- ---------------- --------------- ----------------
Expenses
Office and sundry $ 210 $ 1,396 $ 4,653 $ 4,096 $ 11,280
Professional fees 34,976 870 63,908 6,257 76,186
Stock based compensation for
organizational costs - - - - 50
---------------- --------------- ---------------- --------------- ----------------
35,186 2,266 68,561 10,353 87,516
Less: Interest Income (1,070) - (1,070) - (1,070)
---------------- --------------- ---------------- --------------- ----------------
Net Loss For The Period 34,116 2,266 67,491 10,353 $ 86,446
================
Deficit, Beginning Of Period 52,330 8,137 18,955 50
---------------- --------------- ---------------- ---------------
Deficit, End Of Period $ 86,446 $ 10,403 $ 86,446 $ 10,403
================================================= ================ =============== ================ ===============
Net Loss Per Share $ (0.04) $ (0.01) $ (0.11) $ (0.02)
================================================= ================ =============== ================ ===============
Weighted Average Number Of Shares Outstanding 788,420 500,000 627,368 500,000
================================================= ================ =============== ================ ===============
F-28
UNITED MANAGEMENT, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Stated in U.S. Dollars)
------------------------------------------------- ------------------------------- -------------------------------- ----------------
INCEPTION
JANUARY 29
THREE MONTHS ENDED NINE MONTHS ENDED 1997 TO
MARCH 31 MARCH 31 MARCH 31
2001 2000 2001 2000 2001
------------------------------------------------- ---------------- -------------- ---------------- --------------- ----------------
Cash Flows From Operating Activities
Net loss for the period $ (34,116) $ (2,266) $ (67,491) $ (10,353) $ (86,446)
Non-cash transactions:
Stock-based compensation for
organizational costs - - - - 50
Third party expenses paid by
affiliate on behalf of the Company,
recorded as additional paid-in
capital - 2,983 - 10,545 15,670
Adjustments To Reconcile Net Loss To Net Cash
Used By Operating Activities
Accounts payable and accrued liabilities 35,186 (717) 55,455 (192) 58,690
Loans payable - - 13,106 - 13,106
---------------- -------------- ---------------- --------------- ----------------
1,070 - 1,070 - 1,070
---------------- -------------- ---------------- --------------- ----------------
Cash Flows From Financing Activity
Common stock subject to reconfirmation - - 115,368 - 115,368
---------------- -------------- ---------------- --------------- ----------------
Change In Cash 1,070 - 116,438 - 116,438
Cash, Beginning Of Period 115,368 - - - -
---------------- -------------- ---------------- --------------- ----------------
Cash, End Of Period $ 116,438 $ - $ 116,438 $ - $ 116,438
================================================= ================ ============== ================ =============== ================
F-29
UNITED MANAGEMENT, INC.
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' DEFICIENCY
MARCH 31, 2001
(Stated in U.S. Dollars)
ADDITIONAL
PAID-IN
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------------ ------------ -------------- --------------- --------------
Shares Issued For Cash At $0.0001 500,000 $ 50 $ - $ (50) $ -
------------ ------------ -------------- --------------- --------------
Balance, June 30, 1997 And 1998 500,000 50 - (50) -
Loss For The Year - - - (1,973) (1,973)
------------ ------------ -------------- --------------- --------------
Balance, June 30, 1999 500,000 50 - (2,023) (1,973)
Third Party Expenses Paid By Affiliate On Behalf
Of The Company, recorded as additional paid-in
capital - - 15,670 - 15,670
Loss For The Year - - - (16,932) (16,932)
------------ ------------ -------------- --------------- --------------
Balance, June 30, 2000 500,000 50 15,670 (18,955) (3,235)
Loss For The Period - - - (67,491) (67,491)
------------ ------------ -------------- --------------- --------------
Balance, March 31, 2001 500,000 $ 50 $ 15,670 $ (86,446) $ (70,726)
============ ============ ============== =============== ==============
F-30
UNITED MANAGEMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2001
(Stated in U.S. Dollars)
1. BASIS OF PRESENTATION
The unaudited financial statements as of March 31, 2001 included herein
have been prepared without audit pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with United States generally accepted principles have been
condensed or omitted pursuant to such rules and regulations. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. It is
suggested that these financial statements be read in conjunction with the
June 30, 2000 audited financial statements and notes thereto.
2. NATURE OF OPERATIONS
a) Organization
The Company was incorporated in the State of Nevada, U.S.A. on January
29, 1997.
b) Development Stage Activities
The Company has been in the development stage since inception and has
no operations to date.
3. SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared in accordance
with generally accepted accounting principles in the United States. Because
a precise determination of many assets and liabilities is dependent upon
future events, the preparation of financial statements for a period
necessarily involves the use of estimates which have been made using
careful judgement.
The financial statements have, in management's opinion, been properly
prepared within reasonable limits of materiality and within the framework
of the significant accounting policies summarized below:
a) Development Stage Company
The Company is a development stage company as defined in the
Statements of Financial Accounting Standards No. 7. The Company is
devoting substantially all of its present efforts to establish a new
business and none of its planned principal operations have commenced.
All losses accumulated since inception have been considered as part of
the Company's development stage activities.
F-31
UNITED MANAGEMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2001
(Stated in U.S. Dollars)
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of
revenues and expenses for the reporting period. Actual results could
differ from these estimates.
c) Income Taxes
The Company has adopted Statement of Financial Accounting Standards
No. 109 - "Accounting for Income Taxes" (SFAS 109). This standard
requires the use of an asset and liability approach for financial
accounting and reporting on income taxes. If it is more likely than
not that some portion or all if a deferred tax asset will not be
realized, a valuation allowance is recognized.
d) Financial Instruments
The Company's financial instruments consist of accounts payable and
accrued liabilities, and loans payable.
Unless otherwise noted, it is management's opinion that this Company
is not exposed to significant interest or credit risks arising from
these financial instruments. The fair value of these financial
instruments approximate their carrying values, unless otherwise noted.
e) Net Loss Per Share
The loss per share is calculated using the weighted average number of
common shares outstanding during the year. Fully diluted loss per
share is not presented, as the impact of the exercise of options is
anti-dilutive.
F-32
UNITED MANAGEMENT, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2001
(Stated in U.S. Dollars)
4. SHARE CAPITAL
In December 2000, the Company completed an initial public offering of
288,420 common shares at $0.40 per share for cash proceeds of $115,368. The
proceeds of the offering and the common shares issued pursuant thereto are
being held in an escrow account, and shall remain in the escrow account
until an acquisition meeting specific criteria is completed. Before the
acquisition can be completed, and before the deposited funds and deposited
securities can be released to the Company and the investors, respectively,
the Company is required to update its registration statement with a
post-effective amendment, and within five business days after the effective
date thereof, the Company is required to furnish the investors with the
prospectus produced thereby containing the terms of a reconfirmation offer
and information regarding the proposed acquisition candidate and its
business. Investors must have no fewer than 20 and no more than 45 business
days from the effective date of the post-effective amendment to decide to
reconfirm their investment and remain an investor or, alternately, require
the return of their investment. Each investor shall have 20 business days
from the date of this prospectus to reconfirm their investment. Any
investor not making any decision within the 20 business day period will
automatically have their investment returned.
If the Company does not complete an acquisition meeting the specified
criteria within 18 months of the effective date of its initial public
offering, all of the deposited funds in the escrow account must be returned
to investors.
5. ACQUISITION AGREEMENT
In December 2000, the Company executed an agreement with RRUN Ventures
Inc., a private Nevada corporation, and its shareholders to acquire all of
the issued and outstanding common shares of RRUN Ventures Inc. in exchange
for 305,439 of the Company's common shares. Consummation of this
transaction is conditional, among other things, upon the acceptance of the
reconfirmation offer by the holders of at least 80% of the common shares
subscribed for in the initial public offering described in Note 4.
F-33
AUDITORS' REPORT
To the Directors
RRUN Ventures Inc.
We have audited the consolidated balance sheet of RRUN Ventures Inc. (A
Development Stage Company) as at December 31, 2000 and the consolidated
statements of operations and deficit, cash flows, and stockholders' deficiency
for the period then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with United States and Canadian generally
accepted auditing standards. Those standards require that we plan and perform an
audit to obtain reasonable assurance 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 audit provides a reasonable basis for our
opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2000
and the results of its operations and cash flows for the period then ended in
accordance with United States generally accepted accounting principles.
Vancouver, B.C. "Morgan & Company"
February 14, 2001 Chartered Accountants
COMMENTS BY INDEPENDENT AUDITORS FOR U.S. READERS
ON CANADA-U.S. REPORTING CONFLICT
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by significant uncertainties such as those described in
Note 1(b) of the financial statements. Our report to the shareholders, dated
February 14, 2001, is expressed in accordance with Canadian reporting standards,
which do not permit a reference to such an uncertainty in the Auditors' Report
when the uncertainty is adequately disclosed in the financial statements.
Vancouver, B.C. "Morgan & Company"
February 14, 2001 Chartered Accountants
F-34
RRUN VENTURES INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2000
(Stated in U.S. Dollars)
--------------------------------------------------------------------------------
ASSETS
Current
Cash $ 10,794
Prepaid expense 500
----------------
11,294
Investment (Note 4) 6,750
----------------
$ 18,044
================================================================================
LIABILITIES
Current
Accounts payable $ 32,114
Loans and advances payable (Note 6(b)) 66,803
----------------
98,917
----------------
STOCKHOLDERS' DEFICIENCY
Share Capital
Authorized:
25,000,000 common shares, par value
$0.001 per share
Issued and Outstanding:
6,108,780 common shares 6,109
Additional paid in capital 4,622
Deficit (91,604)
----------------
(80,873)
----------------
$ 18,044
================================================================================
Approved by the Board of Directors:
------------------------------------ -----------------------------------
F-35
RRUN VENTURES INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
FROM INCEPTION ON OCTOBER 12, 2000 TO DECEMBER 31, 2000
(Stated in U.S. Dollars)
--------------------------------------------------------------------------------
Expenses
Administrative services $ 30,164
Consulting 12,609
Office and sundry 9,970
Professional fees 21,781
Travel 4,944
------------------
79,468
Minority interest in loss of subsidiary (219)
------------------
Net Loss For The Period 79,249
Deficit, Beginning Of Period -
------------------
79,249
Net Asset Deficiency Of Legal Parent At Date
Of Reverse Take-Over Transaction
12,355
------------------
Deficit, End Of Period $ 91,604
===============================================================================
Net Loss Per Share $ 0.02
===============================================================================
Weighted Average Number Of Common Shares Outstanding 5,943,780
===============================================================================
F-36
RRUN VENTURES INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
FROM INCEPTION ON OCTOBER 12, 2000 TO DECEMBER 15, 2000
(Stated in U.S. Dollars)
--------------------------------------------------------------------------------
Cash Flows From Operating Activities
Net loss for the period $ (79,249)
Adjustments To Reconcile Net Loss To Net
Cash Used By Operating Activities
Shares issued for other than cash 4,200
Minority interest in loss of subsidiary (219)
Prepaid expense (500)
Accounts payable 32,114
Loans and advances payable 66,803
---------------
23,149
---------------
Cash Flows From Investing Activity
Net asset deficiency of legal parent at dat
of reverse take-over transaction (12,355)
---------------
Increase In Cash 10,794
Cash, Beginning Of Period -
---------------
Cash, End Of Period $ 10,794
================================================================================
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES
During the period, the Company issued 4,200,000 common shares at a value of
$4,200 for consulting services.
During the period, the Company acquired 67% of the issued and outstanding shares
of RAHX Inc. by issuing 2,814,000 common shares at a value of $Nil.
During the period, the Company acquired 15% of the issued and outstanding shares
of Kaph Data Engineering Inc. by issuing 400,000 common shares at a value of
$6,750.
F-37
RRUN VENTURES INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
DECEMBER 31, 2000
(Stated in U.S. Dollars)
ADDITIONAL
PAID-IN
SHARES AMOUNT CAPITAL DEFICIT TOTAL
-------------- ------------- --------------- --------------- --------------
Shares Issued For Cash And Services 4,200,000 $ 4,200 $ - $ - $ 4,200
Adjustment To Number Of Shares Issued And
Outstanding As A Result Of The
Acquisition Of RAHX, Inc.
RAHX, Inc. (4,200,000) (4,200) - - (4,200)
RRUN Ventures Inc. 5,708,780 5,709 (1,509) 4,200
Adjustment To Stated Value Of
Stockholders' Equity To Reflect Minority
Interest In The Net Assets Of RAHX, Inc.
At The Acquisition Date - - (219) - (219)
Net Asset Deficiency Of Legal Parent At
Date Of Reverse Take-Over Transaction - - - (12,355) (12,355)
Shares Issued To Acquire Investment In
Kaph Data Engineering Inc. 400,000 400 6,350 - 6,750
Loss For The Period - - - (79,249) (79,249)
-------------- ------------- --------------- --------------- --------------
Balance, December 31, 2000 6,108,780 $ 6,109 $ 4,622 $ (91,604) $ (80,873)
============== ============= =============== =============== ==============
F-38
RRUN VENTURES INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Stated in U.S. Dollars)
1. NATURE OF OPERATIONS
a) Organization
The Company was incorporated in the State of Nevada, U.S.A. on October
12, 2000.
b) Development Stage Activities
The Company was organized to develop innovative technology based
ventures with a current emphasis on building new technologies for the
entertainment and content industry. The Company's initial venture is
RAHX, a business concept focused on the growing Peer-To-Peer (P2P)
file exchange industry. The first branded RAHX product is Rahxware, a
platform that uses P2P technologies to enable and enhance the
distribution of digital media over the internet.
The Company is in the development stage, therefore, recovery of assets
is dependent upon future events, the outcome of which is
indeterminable. In addition, successful completion of the Company's
development program and its transition, ultimately to the attainment
of profitable operations, is dependent upon obtaining adequate
financing to fulfil its development activities and achieve a level of
sales to support its cost structure.
Management is of the opinion that sufficient short term funding will
be obtained and that current negotiations with potential users of its
products will be successful.
2. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in the United
States. Because a precise determination of many assets and liabilities is
dependent upon future events, the preparation of consolidated financial
statements for a period necessarily involves the use of estimates which
have been made using careful judgement.
The consolidated financial statements have, in management's opinion, been
properly prepared within reasonable limits of materiality and within the
framework of the significant accounting policies summarized below:
a) Consolidation
These consolidated financial statements include the accounts of the
Company and its 67% owned subsidiary, RAHX, Inc.
F-39
RRUN VENTURES INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Stated in U.S. Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
b) Development Stage Company
The Company is a development stage company as defined in the
Statements of Financial Accounting Standards No. 7. The Company is
devoting substantially all of its present efforts to establish a new
business and none of its planned principal operations have commenced.
All losses accumulated since inception have been considered as part of
the Company's development stage activities.
c) Investments
Investments in companies owned less than 20% are recorded at the lower
of cost or fair market value.
d) Software Development Costs
The costs to develop new software products and enhancements to
existing software products will be expensed as incurred until
technological feasibility has been established. Once technological
feasibility has been established, any additional costs will be
capitalized.
e) Income Taxes
The Company has adopted Statement of Financial Accounting Standards
No. 109 - "Accounting for Income Taxes" (SFAS 109). This standard
requires the use of an asset and liability approach for financial
accounting and reporting on income taxes. If it is more likely than
not that some portion or all if a deferred tax asset will not be
realized, a valuation allowance is recognized.
f) Financial Instruments
The Company's financial instruments consist of cash and accounts
payable.
Unless otherwise noted, it is management's opinion that this Company
is not exposed to significant interest or credit risks arising from
these financial instruments. The fair value of these financial
instruments approximate their carrying values, unless otherwise noted.
F-40
RRUN VENTURES INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Stated in U.S. Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
g) Net Loss Per Share
Net loss per share is calculated using the weighted average number of
common shares outstanding during the period. Fully diluted loss per
share is not presented as the impact of the exercise of options is
anti-dilutive.
3. ACQUISITION OF SUBSIDIARY
Effective November 13, 2000, RRUN Ventures Inc. acquired 67% of the issued
and outstanding shares of RAHX, Inc. by issuing 2,814,000 common shares.
Since the transaction resulted in the former shareholders of RAHX, Inc.
owning the majority of the issued shares of RRUN Ventures Inc., the
transaction, which is referred to as a "reverse take-over", has been
treated for accounting purposes as an acquisition by RAHX, Inc. of the net
assets and liabilities of RRUN Ventures Inc. Under this purchase method of
accounting, the results of operations of RRUN Ventures Inc. are included in
these consolidated financial statements from November 13, 2000.
RRUN Ventures Inc. had a net asset deficiency at the acquisition date,
therefore, the 2,814,000 common shares issued on acquisition were issued at
an ascribed value of $Nil with the net asset deficiency of $12,355 charged
to deficit. RAHX, Inc. is deemed to be the purchaser for accounting
purposes. Accordingly, its net assets are included in the consolidated
balance sheet at their previously recorded amounts.
The acquisition is summarized as follows:
Current Assets $ 11,357
Current Liabilities 23,712
--------------
Net Asset Deficiency $ (12,355)
==============
4. INVESTMENT
Kaph Data Engineering Inc. - 159 common shares
representing 15% of the Company's issued and
outstanding common share capital $ 6,750
===========
F-41
RRUN VENTURES INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(Stated in U.S. Dollars)
5. STOCK OPTION PLAN
The Company has granted stock options for the purchase of up to 600,000
common shares at $0.10 per share, and up to 518,000 common shares at $0.25
per share. All expiring on December 1, 2003.
6. RELATED PARTY TRANSACTIONS
a) During the period, the Company issued 4,200,000 at a value of $4,200
to founding shareholders, and to a company controlled by certain
founding shareholders for consulting services.
b) Loans and advances payable are due to related parties, are interest
free, and have no specific terms of repayment.
F-42
RRUN VENTURES INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
(Unaudited)
(Stated in U.S. Dollars)
------------------------------------------- ----------------- ------------------
MARCH 31 DECEMBER 31
2001 2000
------------------------------------------- ----------------- ------------------
ASSETS
Current
Cash $ 3,685 $ 10,794
Prepaid expense - 500
----------------- ------------------
3,685 11,294
Computer Equipment, at cost less
accumulated amortization 5,796 -
Investment (Note 4) 6,750 6,750
----------------- ------------------
$ 16,231 $ 18,044
=========================================== ================= ==================
LIABILITIES
Current
Accounts payable $ 250,846 $ 32,114
Loans and advances payable (Note 6) 183,942 66,803
----------------- ------------------
434,788 98,917
----------------- ------------------
STOCKHOLDERS' DEFICIENCY
Share Capital
Authorized:
25,000,000 common shares,
par value $0.001 per share
Issued and Outstanding:
6,108,780 common shares 6,109 6,109
Additional paid in capital 4,622 4,622
Deficit (429,288) (91,604)
----------------- ------------------
(418,557) (80,873)
----------------- ------------------
$ 16,231 $ 18,044
=========================================== ================= ==================
F-43
RRUN VENTURES INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
(Unaudited)
(Stated in U.S. Dollars)
------------------------------------------------------------------- ----------------- ----------------
THREE INCEPTION
MONTHS OCTOBER 12
ENDED 2000 TO
MARCH 31 MARCH 31
2001 2001
------------------------------------------------------------------- ----------------- ----------------
Expenses
Administrative services $ 43,771 $ 73,935
Amortization 226 226
Consulting 267,524 280,133
Office and sundry 15,034 25,004
Professional fees 4,475 26,256
Travel 6,654 11,598
----------------- ----------------
337,684 417,152
Minority interest in loss of subsidiary - (219)
----------------- ----------------
Net Loss For The Period 337,684 416,933
Deficit, Beginning Of Period 91,604 -
Net Asset Deficiency Of Legal Parent At
Date Of Reverse Take-Over Transaction
- 12,355
----------------- ----------------
Deficit, End Of Period $ 429,288 $ 429,288
=================================================================== ================= ================
Net Loss Per Share $ 0.06
=================================================================== =================
Weighted Average Number Of Common Shares Outstanding 6,108,780
=================================================================== =================
F-44
RRUN VENTURES INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Stated in U.S. Dollars)
--------------------------------------------------------------------------------- ---------------- -----------------
THREE INCEPTION
MONTHS OCTOBER 12
ENDED 2000 TO
MARCH 31 MARCH 31
2001 2001
--------------------------------------------------------------------------------- ---------------- -----------------
Cash Flows From Operating Activities
Net loss for the period $ (337,684) $ (416,933)
Item not involving cash:
Amortization 226 226
---------------- -----------------
(337,458) (416,707)
Adjustments To Reconcile Net Loss To Net
Cash Used By Operating Activities
Shares issued for other than cash - 4,200
Minority interest in loss of subsidiary - (219)
Prepaid expense 500 -
Accounts payable 218,732 250,846
Loans and advances payable 117,139 183,942
---------------- -----------------
(1,087) 22,062
---------------- -----------------
Cash Flows From Investing Activities
Net asset deficiency of legal parent at
date of reverse take-over transaction - (12,355)
Purchase of computer equipment (6,022) (6,022)
---------------- -----------------
(6,022) (18,377)
---------------- -----------------
Increase (Decrease) In Cash (7,109) 3,685
Cash, Beginning Of Period 10,794 -
---------------- -----------------
Cash, End Of Period $ 3,685 $ 3,685
================================================================================= ================ =================
F-45
RRUN VENTURES INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
MARCH 31, 2001
(Unaudited)
(Stated in U.S. Dollars)
ADDITIONAL
PAID-IN
SHARES AMOUNT CAPITAL DEFICIT TOTAL
-------------- ------------- --------------- ---------------- ---------------
Shares Issued For Cash And Services 4,200,000 $ 4,200 $ - $ - $ 4,200
Adjustment To Number Of Shares
Issued And Outstanding As A
Result Of The Acquisition
Of RAHX, Inc.
RAHX, Inc. (4,200,000) (4,200) - - (4,200)
RRUN Ventures Inc. 5,708,780 5,709 (1,509) 4,200
Adjustment To Stated Value Of
Stockholders' Equity To Reflect
Minority Interest In The Net
Assets Of RAHX, Inc. At The
Acquisition Date - - (219) - (219)
Net Asset Deficiency Of Legal
Parent At Date Of Reverse Take-
Over Transaction - - - (12,355) (12,355)
Shares Issued To Acquire Investment
In Kaph Data Engineering Inc. 400,000 400 6,350 - 6,750
Loss For The Period - - - (79,249) (79,249)
-------------- ------------- --------------- ---------------- ---------------
Balance, December 31, 2000 6,108,780 6,109 4,622 (91,604) (80,873)
Loss For The Period - - - (337,684) (337,684)
-------------- ------------- --------------- ---------------- ---------------
Balance, March 31, 2001 6,108,780 $ 6,109 $ 4,622 $ (429,288) $ (418,557)
============== ============= =============== ================ ===============
F-46
RRUN VENTURES INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(Unaudited)
(Stated in U.S. Dollars)
1. NATURE OF OPERATIONS
a) Organization
The Company was incorporated in the State of Nevada, U.S.A. on October
12, 2000.
b) Development Stage Activities
The Company was organized to develop innovative technology based
ventures with a current emphasis on building new technologies for the
entertainment and content industry. The Company's initial venture is
RAHX, a business concept focused on the growing Peer-To-Peer (P2P)
file exchange industry. The first branded RAHX product is Rahxware, a
platform that uses P2P technologies to enable and enhance the
distribution of digital media over the internet.
The Company is in the development stage, therefore, recovery of assets
is dependent upon future events, the outcome of which is
indeterminable. In addition, successful completion of the Company's
development program and its transition, ultimately to the attainment
of profitable operations, is dependent upon obtaining adequate
financing to fulfil its development activities and achieve a level of
sales to support its cost structure.
Management is of the opinion that sufficient short term funding will
be obtained and that current negotiations with potential users of its
products will be successful.
2. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in the United
States. Because a precise determination of many assets and liabilities is
dependent upon future events, the preparation of consolidated financial
statements for a period necessarily involves the use of estimates which
have been made using careful judgement.
The consolidated financial statements have, in management's opinion, been
properly prepared within reasonable limits of materiality and within the
framework of the significant accounting policies summarized below:
a) Consolidation
These consolidated financial statements include the accounts of the
Company and its 67% owned subsidiary, RAHX, Inc.
F-47
RRUN VENTURES INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(Unaudited)
(Stated in U.S. Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
b) Development Stage Company
The Company is a development stage company as defined in the
Statements of Financial Accounting Standards No. 7. The Company is
devoting substantially all of its present efforts to establish a new
business and none of its planned principal operations have commenced.
All losses accumulated since inception have been considered as part of
the Company's development stage activities.
c) Investments
Investments in companies owned less than 20% are recorded at the lower
of cost or fair market value.
d) Software Development Costs
The costs to develop new software products and enhancements to
existing software products will be expensed as incurred until
technological feasibility has been established. Once technological
feasibility has been established, any additional costs will be
capitalized.
e) Income Taxes
The Company has adopted Statement of Financial Accounting Standards
No. 109 - "Accounting for Income Taxes" (SFAS 109). This standard
requires the use of an asset and liability approach for financial
accounting and reporting on income taxes. If it is more likely than
not that some portion or all if a deferred tax asset will not be
realized, a valuation allowance is recognized.
f) Amortization
Computer equipment is being amortized on the declining balance basis
at 30% per annum.
g) Financial Instruments
The Company's financial instruments consist of cash and accounts
payable.
F-48
Unless otherwise noted, it is management's opinion that this Company is
not exposed to significant interest or credit risks arising from these
financial instruments. The fair value of these financial instruments
approximate their carrying values, unless otherwise noted.
F-49
RRUN VENTURES INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(Unaudited)
(Stated in U.S. Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
h) Net Loss Per Share
Net loss per share is calculated using the weighted average number of
common shares outstanding during the period. Fully diluted loss per
share is not presented as the impact of the exercise of options is
anti-dilutive.
3. ACQUISITION OF SUBSIDIARY
Effective November 13, 2000, RRUN Ventures Inc. acquired 67% of the issued
and outstanding shares of RAHX, Inc. by issuing 2,814,000 common shares.
Since the transaction resulted in the former shareholders of RAHX, Inc.
owning the majority of the issued shares of RRUN Ventures Inc., the
transaction, which is referred to as a "reverse take-over", has been
treated for accounting purposes as an acquisition by RAHX, Inc. of the net
assets and liabilities of RRUN Ventures Inc. Under this purchase method of
accounting, the results of operations of RRUN Ventures Inc. are included in
these consolidated financial statements from November 13, 2000.
RRUN Ventures Inc. had a net asset deficiency at the acquisition date,
therefore, the 2,814,000 common shares issued on acquisition were issued at
an ascribed value of $Nil with the net asset deficiency of $12,355 charged
to deficit. RAHX, Inc. is deemed to be the purchaser for accounting
purposes. Accordingly, its net assets are included in the consolidated
balance sheet at their previously recorded amounts.
The acquisition is summarized as follows:
Current Assets $ 11,357
Current Liabilities 23,712
--------------
Net Asset Deficiency $ (12,355)
==============
4. INVESTMENT
Kaph Data Engineering Inc. - 159 common shares
representing 15% of the Company's issued and
outstanding common share capital $ 6,750
==============
F-50
RRUN VENTURES INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(Unaudited)
(Stated in U.S. Dollars)
5. STOCK OPTION PLAN
The Company has granted stock options for the purchase of up to 600,000
common shares at $0.10 per share, and up to 518,000 common shares at $0.25
per share. All expiring on December 1, 2003.
6. RELATED PARTY TRANSACTION
Loans and advances payable are due to related parties, are interest free,
and have no specific terms of repayment.
F-51
UNITED MANAGEMENT INC.
(A Development Stage Company)
INTRODUCTION TO PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
AS AT MARCH 31, 2001, AND FOR THE YEAR ENDED JUNE 30, 2000
AND FOR THE PERIOD FROM JULY 1, 2000 TO MARCH 31, 2001
(Stated in U.S. Dollars)
The following unaudited pro-forma consolidated balance sheet, pro-forma
consolidated statements of operations and explanatory notes give effect to the
acquisition of RRUN Ventures Inc. by United Management Inc. Since the
transaction resulted in the former shareholders of RRUN Ventures Inc. owning the
majority of the issued shares of United Management Inc., the transaction, which
is referred to as a "reverse take-over", has been treated for accounting
purposes as an acquisition by RRUN Ventures Inc. of the net assets and
liabilities of United Management Inc.
The pro-forma consolidated balance sheet, pro-forma consolidated statements of
operations and explanatory notes are based on the estimates and assumptions set
forth in the explanatory notes. This pro-forma consolidated balance sheet and
the pro-forma consolidated statements of operations have been prepared utilizing
the historical financial statements of United Management Inc. and RRUN Ventures
Inc. and should be read in conjunction with the historical financial statements
and notes thereto included elsewhere in this filing.
The pro-forma consolidated statements of operations have been prepared as if the
acquisition had been consummated on July 1, 1999 under the purchase method of
accounting and carried through to March 31, 2001. The pro-forma consolidated
balance sheet has been prepared as if the acquisition was consummated on March
31, 2001.
This pro-forma consolidated financial data is provided for comparative purposes
only, and does not purport to be indicative of the actual financial position or
results of operations had the acquisition occurred at the beginning of the
fiscal period presented, nor are they necessarily indicative of the results of
future operations.
F-52
UNITED MANAGEMENT INC.
(A Development Stage Company)
PRO-FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 2001
(Stated in U.S. Dollars)
--------------------------------- ------------------ ---------------- ---------------------- -----------------
UNITED RRUN
MANAGEMENT VENTURES
INC. INC. ADJUSTMENTS PRO-FORMA
--------------------------------- ------------------ ---------------- ---------------------- -----------------
ASSETS
Current
Cash $ 116,438 $ 3,685 $ - $ 120,123
Computer Equipment - 5,796 - 5,796
Investment - 6,750 - 6,750
------------------ ---------------- ---------------------- -----------------
$ 116,438 $ 16,231 $ - $ 132,669
================================= ================== ================ ====================== =================
LIABILITIES
Current
Accounts payable $ 58,690 $ 250,846 $ - $ 309,536
Loans payable 13,106 183,942 - 197,048
------------------ ---------------- ---------------------- -----------------
71,796 434,788 - 506,584
Common Shares Subject To
Reconfirmation 115,368 - - 115,368
------------------ ---------------- ---------------------- -----------------
187,164 434,788 - 621,952
------------------ ---------------- ---------------------- -----------------
SHAREHOLDERS' DEFICIENCY
Share Capital 50 6,109 (a) (50) 6,109
Additional Paid In Capital 15,670 4,622 (a) 50 4,622
(b) (15,720)
Deficit (86,446) (429,288) (b) 18,955 (500,014)
(b) (3,235)
------------------ ---------------- ---------------------- -----------------
(70,726) (418,557) - (489,283)
------------------ ---------------- ---------------------- -----------------
$ 116,438 $ 16,231 $ - $ 132,669
================================= ================== ================ ====================== =================
F-53
UNITED MANAGEMENT INC.
(A Development Stage Company)
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 2000
(Stated in U.S. Dollars)
--------------------------------------------- ------------------ -------------- ------------------- ----------------
UNITED RRUN
MANAGEMENT VENTURES
INC. INC. ADJUSTMENTS PRO-FORMA
--------------------------------------------- ------------------ -- ----------- --- --------------- -- -------------
Revenue $ - $ - $ - $ -
Expenses 16,932 - - 16,932
------------------ -------------- ------------------- ----------------
Net Loss $ 16,932 $ - $ - $ 16,932
============================================= ================== ============== =================== ================
Net Loss Per Share $ 0.03
============================================= ================== ============== =================== ================
Weighted Average Number Of Common Shares 593,859
Outstanding
============================================= ================== ============== =================== ================
F-54
UNITED MANAGEMENT INC.
(A Development Stage Company)
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD ENDED JULY 1, 2000 TO MARCH 31, 2001
(Stated in U.S. Dollars)
-------------------------------------------- ------------------ --------------- ------------------- ----------------
UNITED RRUN
MANAGEMENT VENTURES
INC. INC. ADJUSTMENTS PRO-FORMA
-------------------------------------------- --- -------------- -- ------------ --- --------------- -- -------------
Revenue $ - $ - $ - $ -
Expenses 67,491 416,933 - 484,424
------------------ --------------- ------------------- ----------------
Net Loss $ 67,491 $ 416,933 $ - $ 484,424
============================================ ================== =============== =================== ================
Net Loss Per Share $ 0.82
============================================ ================== =============== =================== ================
Weighted Average Number Of Common Shares
Outstanding 593,859
============================================ ================== =============== =================== ================
F-55
UNITED MANAGEMENT INC.
(A Development Stage Company)
NOTES AND ASSUMPTIONS TO THE UNAUDITED CONSOLIDATED PRO-FORMA
BALANCE SHEET AND PRO-FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2000
AND FOR THE PERIOD FROM JULY 1, 2000 T0 MARCH 31, 2001
(Stated in U.S. Dollars)
1. ORGANIZATION AND BASIS OF PRESENTATION
The unaudited pro-forma consolidated balance sheet and consolidated
statements of operations have been prepared based on historical financial
information, using U.S. generally accepted accounting principles of United
Management Inc. for the year ended June 30, 2000, and for the nine months
ended March 31, 2001, and of RRUN Ventures Inc. for the period from
inception on October 12, 2000 to March 31, 2001 considering the effects of
the reverse take-over transaction as if the transaction was completed
effective July 1, 1999 in the case of the pro-forma consolidated statements
of operations, and effective March 31, 2001 in the case of the pro-forma
consolidated balance sheet.
2. ASSUMPTION
The number of common shares used in the calculation of the pro-forma net
loss per share data is based on the weighted average number of common
shares outstanding during the period adjusted to give effect to shares
assumed to be issued, had the transaction referred to above been
consummated July 1, 1999.
3. PRO-FORMA ADJUSTMENTS
Record the reverse take-over transaction
F-56
[BACK COVER]