SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ALPH-NET CONSULTING GROUP, LTD.
(Name of small business issuer in its charter)
Nevada
(State or jurisdiction of incorporation or organization)
7373
(Primary Standard Industrial Classification Code Number)
77-0426983
(I.R.S. Employer Identification No.)
2110 E. Water Street, Tucson, Arizona 87519
(Address of principal executive offices)
2110 E. Water Street, Tucson, Arizona 87519
(Address of principal place of business or intended principal place of business)
Patrick E. McKnight
2110 E. Water Street, Tucson, Arizona 87519
(Name, address and telephone number of agent for service)
--------------------------
copy to:
Christopher Dietrich, Esq.
Dieterich and Associates
11300 W. Olympic Blvd., Suite 800
Los Angeles, California 90064
(310) 312-6888
Approximate date of proposed sale to the public: From time to time after the
effective date of this registration statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434 under the Securities Act, please check the following box. / /
CALCULATION OF REGISTRATION FEE
================================================================================
Title of Each Class Amount Amount of
Securities to be Offering Price Per Registration
to be Registered Registered Unit Fee
- ---------------------------- ---------- ------------------ ---------------
Common Stock, $.001par value 250,000 $ .001(1) $ .023
TOTAL .023
MINIMUM FEE $100.00
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(1)Estimated solely for the purpose of calculating the registration fee. The
price of the shares has been determined by Alph-Net on the basis of the par
value of the shares issued and outstanding.
================================================================================
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The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until the registration statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.
================================================================================
Alph-Net CONSULTING GROUP, LTD.
CROSS REFERENCE SHEET
Form SB-2 Item Caption in Prospectus
- -------------- ---------------------
PART I
Item 1. Front of Registration Statement and
Outside Front Cover of Prospectus........................... Front of Registration
Statement and
Outside Front Cover of Prospectus
Item 2. Inside Front and Outside Back Cover
Pages of Prospectus....................................... Inside Front and Outside
Back Cover Pages of Prospectus
Item 3. Summary Information and Risk Factors............................ Prospectus Summary; Risk
Factors
Item 4. Use of Proceeds................................................. Use of Proceeds
Item 5. Determination of Offering Price................................. Not Applicable
Item 6. Dilution........................................................ Not Applicable
Item 7. Selling Shareholders............................................ Selling Shareholders
Item 8. Plan of Distribution............................................ Plan of Distribution
Item 9. Legal Proceedings............................................... Business-Legal Proceedings
Item 10. Directors, Executive Officers, Promoters and
Control Persons........................................... Management
Item 11. Security Ownership of Certain Beneficial
Owners and Management..................................... Management-Principal
Shareholders
Item 12. Description of Securities........................................ Description of Securities
Item 13. Interest of Named Experts and Counsel............................ Not Applicable
Item 14. Disclosure of Commission Position on
Indemnification........................................... Indemnification of Officers
and Directors
Item 15. Organization Within Last Five Years.............................. Certain Transactions
Item 16. Description of Business.......................................... Business
Item 17. Management's Discussion and Analysis or
Plan of Operation........................................... Management's Discussion
and Analysis
of Financial Conditions and Plan of
Operations
Item 18. Description of Property.......................................... Properties
Item 19. Certain Relationships and Related Transactions................... Certain Transactions
Item 20. Market for Common Equity and Related
Stockholder Matters....................................... Market Information
Item 21. Executive Compensation........................................... Management-Executive
Compensation
Alph-Net CONSULTING GROUP, LTD.
CROSS REFERENCE SHEET
Form SB-2 Item Caption in Prospectus
- -------------- ---------------------
PART I
Item 22. Financial Statements............................................. Financial Statements
Item 23. Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure.................... Not Applicable
PART II
Item 24. Indemnification of Directors and Officers........................ Indemnification of Directors and
Officers
Item 25. Other Expenses of Issuance and Distribution...................... Other Expenses of Issuance and
Distribution
Item 26. Recent Sales of Unregistered Securities.......................... Recent Sales of Unregistered
Securities
Item 27. Exhibits......................................................... Exhibits
Item 28. Undertakings..................................................... Undertakings
SUBJECT TO COMPLETION, DATED ________________
PROSPECTUS
Alph-Net Consulting Group, Ltd.
250,000 Shares of Common Stock $.001 Par Value
This prospectus covers the resale, from time to time, of up to 250,000 shares of
common stock, $.001 par value per share, of Alph-Net Consulting Group, Ltd., a
Nevada corporation, issued to the former officer and director of Alph-Net and
twenty-eight other investors for their own accounts in the over-the-counter
market, at prevailing market prices, at negotiated prices or otherwise. We refer
to the outstanding common stock of Alph-Net as the "shares" or the "common
stock" throughout this prospectus. We also refer to the former officer and
director and the twenty-eight other investors as the "Selling Shareholders." The
selling price of any shares will be determined by market factors at the time of
resale. To our knowledge, none of the Selling Shareholders have made any
arrangement with any brokerage firm for the sale of the shares. We issued the
shares to the twenty-eight non-officer non-director other investor Selling
Shareholders in various private offerings without registration since 1997. Mr.
Daniel L. Hodges, former director, president and secretary, was issued his
shares in connection with the founding of the Company without registration in
1997.
Alph-Net will not be receiving any proceeds from the sale of shares by the
Selling Shareholders but will bear all of the expenses of the registration of
the shares.
Alph-Net's common stock is not currently listed nor quoted on any quotation
medium. There can be no assurance that Alph-Net's common stock will ever be
quoted on any quotation medium or that any trading market for Alph-Net`s common
stock will ever develop.
------------------------
See "Risk Factors" beginning on page 2 for a discussion of certain factors that
should be considered by investors.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
------------------------
The date of this prospectus is February 28, 2002
[Place the following paragraph landscape across the left side of the page.]
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not an offer to buy these securities in any
state where the offer or sale is not permitted.
TABLE OF CONTENTS
Page
----
Prospectus Summary............................................................................... 1
Selected Financial Data.......................................................................... 2
Risk Factors..................................................................................... 3
Use of Proceeds.................................................................................. 17
Market Information............................................................................... 17
Selling Shareholders............................................................................. 17
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................................... 20
Business......................................................................................... 21
Management....................................................................................... 24
Certain Transactions............................................................................. 25
Description of Securities........................................................................ 26
Transfer Agent, Warrant Agent and Registrar...................................................... 26
Shares Eligible for Future Sale.................................................................. 26
Plan Distribution................................................................................ 27
Legal Matters.................................................................................... 27
Experts.......................................................................................... 27
Additional Information........................................................................... 28
Index to Financial Statements.................................................................... 29
Until 90 days after the effective date, all dealers that effect transactions in
these shares, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
No dealer, sales representative or any other person has been authorized to give
any information or to make any representations in connection with the offering
described in this prospectus other than those contained in this prospectus, and,
if given or made, such information or representations must not be relied upon as
having been authorized by Alph-Net Consulting Group. Neither the delivery of
this prospectus nor any sale made pursuant to this prospectus shall, under any
circumstances, create any implication that there has been no change in the
affairs of Alph-Net since the date of this prospectus or that the information
contained in it is correct as of any time subsequent to its date.
Prospectus summary
Our summary is qualified by the more detailed information and consolidated
financial statements, including the notes thereto, you will find elsewhere in
this prospectus, including the information set forth under "Risk Factors." Some
of the statements contained in the prospectus summary and throughout this
prospectus regarding matters that are not historical facts, such as statements
regarding Alph-Net's growth strategy, are forward-looking statements as such
term is defined in the Securities Act of 1933, as amended (the "Securities
Act"). Since these forward-looking statements include risks and uncertainties,
actual results may differ materially from those expressed or implied by such
statements. Factors that could cause actual results to differ materially
include, but are not limited to, those discussed under "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Plan of
Operations" and "Business," as well as those discussed elsewhere in this
prospectus.
Alph-Net Consulting Group, Ltd.
Alph-Net Consulting Group, Ltd. was organized under the laws of the state of
Nevada on April 15, 1996. On December 31, 2001, the Company closed on the
purchase of the assets and liabilities of McKnight Consulting LLC.
Alph-Net Consulting Group is a technical consulting company whose primary focus
is in developing, supporting, designing, and implementing computer connectivity
solutions with small to mid-sized companies nationwide and providing research
and technical consulting specializing in social science research and technology
that supports efforts in research. Efforts are focused on research design,
methodology and statistics in formulating sound research design proposals. These
services include network design, configuration, management, administration,
programming, and evaluation. In addition to these services, database
connectivity and server application management is offered when these services
are integrated into the network design.
Alph-Net's common stock is not listed on any recognized exchange or quoted on
any quotation medium. There are no plans, proposals, arrangements or
understandings with any persons concerning the development of a trading market
in Alph-Net's common stock.
The offering.
Alph-Net previously issued 250,000 shares of its common stock to 29 individuals.
This prospectus covers any resale of these shares.
Common Stock Registered for Resale................................250,000 shares
Common Stock Outstanding prior to the Offering..................1,000,000 shares
Common Stock Outstanding after the Offering.....................1,000,000 shares
1
Selected financial data
The following selected consolidated financial data should be read in conjunction
with "Management's discussion and analysis of financial condition and plan of
operations" and the consolidated financial statements, including the
accompanying notes, included elsewhere in this prospectus. The statement of
operations data for the years ended 2001 and 2000 and the balance sheet data at
2001 and 2000 are derived from Alph-Net's consolidated financial statements,
which have been audited by Alph-Net's independent auditors, included elsewhere
in this prospectus, and include all adjustments that Alph-Net considers
necessary for a fair presentation of the financial position and results of
operations at that date and for such periods.
BALANCE SHEET DATA:
December 31,
-----------------------------------------------------
2001 2000
---- ----
Assets........................................................ $ 22,921 $ 53,047
======== ========
Liabilities - Total Payables.................................. $ 4,183 $ 9,305
--------- -------
Stockholders' Equity:
Owners' Equity............................................. -- 43,742
Common Stock, Par value $.001
Authorized 100,000,000 shares, -- --
Issued 1,000,000 shares at December 31, 2001 and 2000... 1,000 --
Paid-In Capital............................................ 42,655 --
Retained Deficit .......................................... (24,917) --
--------- ---
Total Stockholders' Equity.............................. 18,738 43,742
------- -------
Total Liabilities and Stockholders' Equity.............. $22,921 $53,047
======= =======
STATEMENT OF OPERATIONS DATA:
For Year Ended
December 31,
-----------------------------------------
2001 2000
---- ----
Revenues:
Net Sales $36,455 $23,611
Cost of Goods Sold 37,301 10,693
------- -------
Gross Profit (Loss) $(846) $12,918
------- -------
Expenses:
General and Administrative 24,070 10,766
Depreciation 2,499 2,074
Profit (Loss) (27,415) 78
Income Taxes -- --
Net Income (Loss) (27,415) 78
--------------------- -------------------
Basic & Diluted loss per share $ (9.10) $ --
======== ====
2
Risk factors
Alph-Net's business is subject to numerous risk factors. You should carefully
consider the following risk factors, in addition to the other information
appearing in this propspectus, before investing in the shares.
We have a limited operating history and
may not successfully implement its
business plan.
We have a limited operating history, and our business model is still in
development. McKnight Consulting originally commenced operations in
1990 a sole proprietorship and then became a limited liability company
under the laws of the state of Arizona in 2001. As an early stage
computer consulting company, we are subject to expenses and
difficulties associated with implementing our business plan that are
not typically encountered by more mature companies. The risks
associated with implementing our business plan relate to:
- building out or outsourcing web hosting and network
infrastructure;
- expanding a sales structure and marketing programs;
- increasing awareness of our brand;
- providing services to customers that are reliable and
cost-effective;
- responding to technological development or service
offerings by competitors; and
- attracting and retaining qualified personnel.
If we are not successful in implementing our business plan, our
business or future financial or operating results could suffer.
The Company will need additional funds which, if available, could result in
dilution of your shareholdings or an increase in its interest expense. If these
funds are not available, its business could be hurt.
The Company's business plan projects expansion through acquisitions
funded mostly with stock but requiring some cash expenses and
consideration. We will need to raise additional funds through public or
private debt or equity financing in order to:
- take advantage of anticipated opportunities or
acquisitions of complementary assets, technologies or
businesses;
3
- develop new products;
- respond to unanticipated competitive pressures; or
- achieve profitability.
When additional funds become necessary, additional financing may not be
available on terms favorable to the Company or available at all. If
adequate funds are not available or are not available on acceptable
terms when needed, the Company's business could be hurt. If additional
funds are raised through the issuance of equity securities, the
percentage ownership of the Company's then current stockholders may be
reduced, and the new equity securities may have rights, preferences or
privileges senior to those of the holders of our common stock. If
additional funds are raised through the issuance of debt securities,
these securities could have some rights, preferences and privileges
senior to those of the holders of our common stock, and the terms of
this debt could impose restrictions on its operations and result in
significant interest expense to McKnight Consulting.
Rapid growth strategy is likely to place a
significant strain on our resources.
The future success of the Company depends in large part on our ability
to manage any achieved growth in its business. For its business plan to
succeed, we will need:
- to expand our business with new and current
customers;
- to develop and offer successful new products and
services;
- to retain key employees and hire new employees; and
- to ensure that any future business that may develop
or be acquired will perform in a satisfactory manner.
These activities are expected to place a significant strain on our
resources. Also, we cannot guarantee that any of these will occur or
that we will succeed in managing the results of any success in its
business plan.
Annual and quarterly operating results are subject to significant fluctuations.
As a result, period-to-period comparisons of results of Operations are not
necessarily meaningful and should not be relied upon as indications of future
performance.
4
The Company has experienced significant fluctuations in its results of
operations on a quarterly and annual basis. We expect to continue to
experience significant fluctuations in its future quarterly and annual
results of operations due to a variety of factors, many of which are
outside of our control, including:
- demand for and market acceptance of our services;
- customer retention;
- the timing and success of our marketing efforts;
- the timing and magnitude of capital expenditures,
including costs relating to the expansion of
operations;
- the timely expansion of existing facilities and
completion of new facilities;
- the ability to increase bandwidth as necessary;
- fluctuations in bandwidth used by customers;
- introductions of new services or enhancements by the
Company and its competitors;
- increased competition in its markets;
- economic conditions including those in the technology
sector;
- potential unfavorable legislative and regulatory
developments;
- growth of Internet use and establishment of Internet
operations by mainstream enterprises; and
- changes in its pricing policies and its competitors'
pricing policies.
A relatively large portion of the Company's expenses are fixed in the
short-term. As a result, its results of operations will be particularly
sensitive to fluctuations in revenue.
5
A relatively large portion of our expenses are fixed in the short-term,
particularly in respect of hardware, data and telecommunications costs,
depreciation, amortization, real estate occupancy costs, interest
expense and personnel. Because we will be required to incur these fixed
expenses, irrespective of our revenue, its future results of operations
are particularly sensitive to fluctuations in revenue.
The expected continued growth in the market for its products and services may
not materialize or may materialize in a manner we have not anticipated.
The market is rapidly evolving. Whether, and the manner in which, the
market for the products and services of the Company will continue to
grow is uncertain. The market for these products and services may be
inhibited for a number of reasons, including:
- the reluctance of businesses to outsource their
connectivity solutions and Web hosting needs;
- our failure to successfully market its products and
services to new customers; and
- the inability to maintain and strengthen our brand
awareness.
Success depends in large part on the
continued growth of the Internet Market.
The Company's business will be hurt if demand for Internet and related
services does not continue to grow. This demand may be inhibited for a
number of reasons, including:
- general economic conditions;
- access costs;
- inadequate network infrastructure;
- security concerns;
- uncertainty of legal and regulatory issues concerning
use of the Internet;
- inconsistent quality of service; and
- lack of availability of cost-effective, high-speed
service.
The Internet infrastructure may not be able to support the demands
placed on it or the Internet's performance and reliability may decline.
6
Similarly, Web sites have experienced interruptions in their service as
a result of outages and other delays occurring throughout the Internet
network infrastructure. This could hurt our business.
A portion of our growth depends on our ability to expand web hosting capacity to
meet anticipated demand.
Continuing to expand web hosting center capacity is critical to
achieving the goals of the Company's business plan. This expansion is
likely to include the need to add new hardware and software, and may
include the opening of additional web hosting centers. We to add web
hosting center capacity in the future as justified by customer demand.
Its ability to do so successfully depends on:
- anticipating and planning for future demand levels;
- having access to sufficient capital; and
- locating and securing satisfactory web hosting center
sites and implementing the build-out of these and
existing sites, all of which may require significant
lead time.
If we are unable to expand our capacity effectively, our growth may
suffer and we may not be able to adequately meet the demands of
existing customers.
The Company operates in an extremely
competitive market and may not be able to
compete effectively.
The computer connectivity consulting services market is extremely
competitive and most of our competitors are more established and have
greater financial resources. In addition, there are no substantial
barriers to entry in this market. We also expect that competition will
intensify in the future. Most of our competitors have greater market
presence, engineering and marketing capabilities and financial,
technological and personnel resources than we do. As a result, as
compared to the Company, our competitors may:
- develop and expand their network and web hosting
infrastructures and service offerings more
efficiently or more quickly;
- adapt more swiftly to new or emerging technologies
and changes in customer requirements;
- take advantage of acquisitions and other
opportunities more effectively; and
- more effectively leverage existing relationships with
customers or exploit a more recognized brand name to
market and sell their services.
7
The Company's current and prospective competitors generally may be
divided into the following three groups:
- Web hosting companies including Digex, Inc., Verio,
Inc., Genuity, Globix Corporation, PSINet Inc.,
Exodus Communications, Inc. and other companies;
- Internet solution companies including Razorfish Inc.,
IBM Global Services, Accenture, US Internetworking
Inc., Scient Corp., Cambridge Technology Partners,
Inc., Whittman-Hart Inc., Oracle Corporation, the Big
5 accounting firms, EDS Corporation and other
companies; and
- Internet connectivity, VPNs and security providers
including Genuity, Verio Inc., Qwest Communications
International Inc., Sprint Corporation, AT&T Corp.,
UUNET Technologies, Inc., XO Communications, Cable &
Wireless plc, WorldCom, Inc. and other national and
regional providers.
We believe that we may also face competition from other computer
hardware and software companies and other media, technology and
telecommunications companies.
The number of businesses providing connectivity-related services is
rapidly growing. We are aware of other companies, in addition to those
named above, that have entered into or are forming joint ventures or
consortia to provide services similar to those provided by the Company.
Others may acquire the capabilities necessary to compete with McKnight
Consulting through acquisitions.
We could encounter significant pricing pressure as a result of increased
competition and industry consolidation.
As a result of increased competition and consolidation in the industry,
we could encounter significant pricing pressure, which in turn could
result in significant reductions in the average selling price of our
services. We may not be able to offset such price reductions even if we
obtain an increase in the number of our customers, derive higher
revenue from enhanced services or manage to reduce costs. Increased
price or other competition could erode market share and could
significantly hurt business. We cannot assure you that we will have the
financial resources, technical expertise or marketing and support
capabilities to compete successfully in that environment.
We could experience system failures and capacity constraints, which would affect
its ability to compete.
8
Interruptions in service to our customers could hurt our business. To
succeed, we must be able to operate our network and web hosting
management infrastructure 24 hours per day, seven days per week,
without interruption. The Company's operations depend upon its ability
to protect its network and web hosting infrastructure, its equipment
and customer data against damage from human error and/or "acts of God."
Even if we take precautions, the occurrence of a natural disaster or
other unanticipated problems could result in interruptions in the
services we provide to its customers.
Although we have attempted to build redundancy into our network and
hosting facility by establishing a redundant, rigorously engineered
backbone connected to our web hosting center, our network is currently
subject to various single points of failure. For example, a problem
with one of our routers or switches could cause an interruption in the
services we provide to some of our customers. Any interruptions in
service could:
- cause end users to seek damages for losses incurred;
- require us to spend more money and dedicate more
resources to replacing existing equipment, expand
facilities or adding redundant facilities;
- cause the Company to spend money on existing or new
equipment and infrastructure earlier than planed;
- damage our reputation for reliable service;
- cause existing end-users and resellers to cancel
contracts; or
- make it more difficult for us to attract new
end-users and partners.
Any of these results could hurt our business.
Failure of the national telecommunications network and Internet
infrastructure to continue to grow in an orderly manner could also
result in service interruptions. While the national telecommunications
network and Internet infrastructure have historically developed in an
orderly manner, there is no guarantee that this will continue as the
network expands and more services, users and equipment connect to the
network. Failure by the telecommunications providers to provide the
Company with the data communications capacity required could cause
service interruptions, which could hurt our business.
We are dependent on networks built and operated by others. If we do not have
continued access to a reliable network, our business will suffer.
In delivering services, we rely on networks that are built and operated
9
by others. We do not have control over these networks, nor can we
guarantee that we will continue to have access on terms that fit our
business needs.
The Company's use of the infrastructure of other communications
carriers presents risks. Success partly depends upon the coverage,
capacity, scalability, reliability and security of the network
infrastructure provided to us by telecommunications network suppliers,
including AT&T Corp., Sprint Corporation, Verizon Communications,
Pacific Bell, Worldcom, Inc. and Broadwing, Inc. Our expansion plans
require additional network resources. Without these resources, our
ability to execute our business strategy could be hurt. In addition,
future expansion and adaptation of our network and web hosting
infrastructure may require substantial financial, operational and
management resources. We may not be able to expand or adapt our network
or web hosting infrastructure on a timely basis and at a commercially
reasonable cost to meet additional demand, changing customer
requirements or evolving industry standards. In addition, if demand for
usage of network and web hosting facilities were to increase faster
than projected or were to exceed current forecasts, the network could
experience capacity constraints which would hurt our performance.
The consolidation of network providers could adversely affect peering
and transit arrangements if peering criteria becomes more restrictive
or cost prohibitive. We also depend on telecommunications suppliers to
provide uninterrupted and error-free service through their
telecommunications networks. If these suppliers greatly increase the
price for their services or if the telecommunications capacity
available to the Company is insufficient for its business purposes, and
we are unable to use alternative networks or pass along any increased
costs to our customers, our business could suffer.
The Company's network and software are vulnerable to security breaches and
similar threats that could result in being liable for damages and harm its
reputation.
Despite the implementation of network security measures, the core of
the Company's network infrastructure is vulnerable to computer viruses,
break-ins and similar disruptive problems caused by Internet users.
This could result in being liable for damages, and our reputation could
suffer, thereby deterring potential customers from working with us.
Security problems caused by third parties could lead to interruptions
and delays or to the cessation of service to our customers.
Furthermore, inappropriate use of the network by third parties could
also jeopardize the security of confidential information stored in our
computer systems and in those of its customers.
We rely upon encryption and authentication technology purchased from
third parties to provide the security and authentication necessary to
effect secure transmission of confidential information. Although we
intend to continue to implement industry-standard security measures, in
the past third parties have occasionally circumvented some of these
standards. Therefore, we cannot assure you that the measures we
implements will not be circumvented. The costs and resources required
to eliminate computer viruses and alleviate other security problems may
result in interruptions, delays or cessation of service to its
customers, which could hurt our business.
10
The Company brand is not as well known as most of our competitors, and failure
to develop brand recognition could hurt its business.
To successfully execute its strategy, we must strengthen its brand
awareness. While many of our competitors have well-established brands,
our market presence has been limited principally to Tucson, Arizona. In
order to build our brand awareness, our marketing efforts must succeed,
and we must provide high quality services. We cannot assure you that
these efforts will succeed as planned. If we do not build our brand
awareness, our ability to realize strategic and financial objectives
could be hurt.
If we do not respond effectively and on a timely basis to rapid technological
change, our business could suffer.
If we do not successfully use or develop new technologies, introduce
new services or enhance existing services on a timely basis, or new
technologies or enhancements used or developed by us do not gain market
acceptance, our business could be hurt. This industry is characterized
by rapidly changing technology, industry standards, customer needs and
competition, as well as by frequent new product and service
introductions. Our future success will depend, in part, on our ability
to accomplish all of the following in a timely and cost-effective
manner, all while continuing to develop our business model and
rolling-out its services on a national level:
- effectively use and integrate leading technologies;
- continue to develop technical expertise;
- enhance products and current networking services;
- develop new products and services that meet changing
customer needs;
- have the market accept our services;
- advertise and market our products and services; and
- influence and respond to emerging industry standards
and other changes.
The Company cannot assure you that it will successfully use or develop
new technologies, introduce new services or enhance our existing
services on a timely basis, or that new technologies or enhancements
used or developed by us will achieve market acceptance. Our pursuit of
necessary technological advances may require substantial time and
expense. In addition, we cannot assure you that, if required, we will
successfully adapt our services to alternate devices and conduits.
11
If our services do not continue to be compatible and interoperable with
products and architectures offered by other industry members, our
ability to compete could be impaired. Our ability to compete
successfully is dependent, in part, upon the continued compatibility
and interoperability of our services with products and architectures
offered by various other members of the industry. Although we intend to
support emerging standards in the market for connectivity solutions, we
cannot assure you that we will be able to conform to new standards in a
timely fashion and maintain a competitive position in the market. Our
services rely on the continued widespread commercial use of
Transmission Control Protocol/Internet Protocol, commonly known as
TCP/IP, which is an industry standard to facilitate the transfer of
data. Alternative open protocol and proprietary protocol standards
could emerge and become widely adopted. A resulting reduction in the
use of TCP/IP could render our services obsolete and unmarketable. The
Company's failure to anticipate the prevailing standard or the failure
of a common standard to emerge could hurt its business.
We may be exposed to risks associated with acquisitions, including integration
risks and risks associated with methods of financing and the impact of
accounting treatment. Also, completed acquisitions may not enhance our business.
A component of the Company's strategy is to acquire web hosting and
Internet solutions companies and other businesses complementary to our
operations. In the future, we intend to acquire companies that
complement our existing business model and growth strategies. Any
future acquisitions would be accompanied by the risks commonly
encountered in acquisitions, including:
- the difficulty of assimilating the operations and
personnel of acquired companies;
- the potential disruption of our business;
- Our management's inability to maximize its financial
and strategic position through the incorporation of
an acquired technology or business into its service
offerings;
- the difficulty of maintaining uniform standards,
controls, procedures and policies;
- the potential loss of key employees from acquired
businesses, and the impairment of relationships with
the employees and customers of an acquired business
as a result of changes in management; and
12
- the inaccuracy of financial data of acquired
companies.
We cannot assure you that any completed acquisition will enhance our
business. If we consummate acquisitions in which any significant
portion of the consideration consists of cash, a significant portion of
our available cash could be used to consummate the acquisitions. If we
consummate acquisitions in which any significant portion of the
consideration consists of stock, stockholders could suffer significant
dilution of their interest.
In addition, we could incur or assume significant amounts of
indebtedness in connection with acquisitions. The purchase price of
future acquisitions will most likely be significantly greater than the
fair value of the acquired net assets. Acquisitions required to be
accounted for under the purchase method could result in significant
goodwill and/or amortization charges for acquired technology.
We dependent on hardware and software
suppliers to provide us with the products
and services we need to serve our
customers.
We rely on outside vendors to supply us with computer hardware,
software and networking equipment. These products are available from
only a few sources. We purchase a significant portion of these products
from Sun Microsystems, Inc., Compaq Computer Corporation, Cisco
Systems, Inc., Microsoft Corporation and Oracle Corporation. We cannot
assure you that we will be able to obtain the products and services
that we need on a timely basis and at affordable prices.
We have, in the past experienced delays in receiving shipments of
equipment purchased for resale. To date, these delays have not
adversely affected us, but we cannot guarantee that we will not be
adversely affected by delays in the future. We may not be able to
obtain computer equipment on the scale and at the times required by us
at an affordable cost. Suppliers may enter into exclusive arrangements
with competitors or stop selling us their products or services at
commercially reasonable prices. If sole or limited source suppliers do
not provide us with products or services, our business, financial
condition and results of operations may be significantly hurt.
We operate in an uncertain regulatory and
legal environment. New laws and
regulations could harm our business.
We are not currently subject to direct regulation by the Federal
Communications Commission ("FCC") or any other governmental agency,
other than regulations applicable to businesses in general. However, in
the future, we may become subject to regulation by the FCC or another
regulatory agency. Our business could suffer depending on the extent to
which our activities are regulated or proposed to be regulated.
13
While there are currently few laws or regulations that specifically
regulate Internet communications, laws and regulations directly
applicable to online commerce or Internet communications are becoming
more prevalent. There is much uncertainty regarding the market-place
impact of these laws. In addition, various jurisdictions already have
enacted laws covering intellectual property, privacy, libel and
taxation that could affect our business by virtue of their impact on
online commerce. Further, the growth of the Internet, coupled with
publicity regarding Internet fraud, may lead to the enactment of more
stringent consumer protection laws. If the Company becomes subject to
claims that we have violated any laws, even if we successfully defend
against these claims, our business could suffer. Moreover, new laws
that impose restrictions on our ability to follow current business
practices or increase our costs of doing business could hurt our
business.
We may be subject to legal liability for distributing or publishing content over
the Internet, which could be costly for it to defend.
It is possible that claims will be made against online service
companies and Internet access providers in connection with the nature
and content of the materials disseminated through their networks.
Several private lawsuits are pending which seek to impose liability
upon online services companies and Internet access providers as a
result of the nature and content of materials disseminated over the
Internet. If any of these actions succeed, we might be required to
respond by investing substantial resources in connection with this
increased liability or by discontinuing some of our service or product
offerings. Also, any increased attention focused upon liability issues
relating to the Internet could also have a negative impact on the
growth of Internet use.
We may be unable to protect intellectual
property rights or to continue using
intellectual property that we license from
others.
We rely on a combination of copyright, trademark, service mark and
trade secret laws and contractual restrictions to establish and protect
certain proprietary rights. We have no patented technology that would
bar competitors from our market. Despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy or
otherwise obtain and use our data or technology.
We also rely on certain technologies licensed from third parties. We
cannot be sure these licenses will remain available to us on
commercially reasonable terms or at all. The loss of such technology
may require us to obtain substitute technology of lesser quality or
performance standards or at greater cost that could harm our business.
14
Management will control 75% of our common stock, and these parties may have
conflicts of interest.
Patrick E. McKnight and Kathy McKnight own 75% of the outstanding
common stock of Alph-Net Consulting. Accordingly, Patrick E. McKnight
and Kathy McKnight, are able to exert considerable influence over any
stockholder vote, including any vote on the election or removal of
directors and any merger, consolidation or sale of all or substantially
all of our assets, and control our management and affairs. Such control
could discourage others from initiating potential merger, takeover or
other change in control transactions. As a consequence, our business
could be hurt.
We are dependent on key personnel and
operate in an industry where it is
difficult to attract and retain qualified
personnel.
The Company expects that it will need to hire additional personnel in
all areas of our business. The competition for personnel throughout the
industry is intense. We have experienced difficulty in attracting
qualified new personnel. If we do not succeed in attracting new,
qualified personnel, our business could suffer. We are also dependent
on the continued services of our key personnel, particularly our
current management. We do not have employment agreements with our
executive officers, nor do we have key man insurance policies on
management. The loss of current management would harm business.
Industry consolidation could make it more
difficult to compete.
Companies offering connectivity, data and communications services are
increasingly consolidating. As a company with a limited operating
history, we may not be able to successfully compete with businesses
that have combined, or will combine, to produce companies with
substantially greater financial, sales and marketing resources, larger
customer bases, extended networks and infrastructures and more
established relationships with vendors, distributors and partners. In
addition, this consolidation trend could prevent or hinder our ability
to further grow our operations through acquisitions. With these
heightened competitive pressures, there is a significant risk that the
value of our common stock will decline.
There is no market for our shares and you
may no be able to sell them.
There has been no trading market for our common stock. Although we
intend to apply to list our common stock on the OTC Bulletin Board,
there can be no assurance that our application will be granted and
there can be no assurance that an active market will develop for our
15
common stock. Therefore, it may be difficult to sell shares of the
Company if you should desire or need to sell.
If a market develops, the market price of the common stock may
fluctuate significantly due to a number of factors, some of which may
be beyond our control, including:
* the potential absence of securities analysts covering us and
distributing research and recommendations about us;
* the liquidity of our common stock will be low because only 250,000
shares will be in the hands of non-affiliates of the company;
* changes in earnings estimates by securities analysts or our ability
to meet those estimates;
* the operating results and stock price performance of other comparable
companies;
* overall stock market fluctuations; and
* economic conditions generally and in the mortgage industry in
particular.
The purchase of penny stocks can be risky.
In the event that a public trading market develops for our shares, such
securities may be classified as a "penny stock" depending upon their
market price and the manner in which they are traded. Section 3(a)(51)
of the Securities Exchange Act of 1934 defines a "penny stock," as any
equity security that has a market price of less than $5.00 per share
and is not admitted for quotation and does not trade on the Nasdaq
Stock Market or on a national securities exchange. For any transaction
involving a penny stock, unless exempt, the rules require delivery by
the broker of a document to investors stating the risks of investment
in penny stocks, the possible lack of liquidity, commissions to be
paid, current quotations and investors' rights and remedies, a special
suitability inquiry, regular reporting to the investor and other
requirements. Prices for penny stocks are often not available and
investors are often unable to sell such stock. Thus an investor may
lose his entire investment in a penny stock and consequently should be
cautious of any purchase of penny stocks.
Any of these factors could have a significant and adverse impact on the market
price of our common stock. In addition, the stock market in general has
experienced extreme volatility and rapid decline that has often been unrelated
or disproportionate to the operating performance of particular companies. These
broad market fluctuations may adversely affect the trading price of our common
stock, regardless of our actual operating performance.
16
Use of proceeds
The principal purpose of this registration statement is to create a more liquid
public market for Alph-Net's common stock. Upon the effectiveness of this
registration statement, twenty-five percent (25%) of Alph-Net's outstanding
shares of common stock will be registered for resale under the Securities Act.
While Alph-Net will bear the expenses of the registration of the shares,
Alph-Net will not realize any proceeds from any actual resales of the shares
that might occur in the future. All proceeds from any resale will be received by
the selling shareholders.
Market information
Alph-Net's common stock is not listed or quoted at the present time, and there
is no present public market for Alph-Net's common stock. There can be no
assurance that a public market for Alph-Net's common stock will ever develop.
Dividend policy.
Alph-Net has never declared or paid cash dividends on its capital stock.
Alph-Net currently intends to retain earnings, if any, to finance the growth and
development of its business and does not anticipate paying any cash dividends in
the foreseeable future.
Holders.
As of the date of this prospectus, there are 31 shareholders of record.
Selling shareholders
The following table sets forth certain information as of the date of this
prospectus, with respect to the selling shareholders for whom Alph-Net is
registering shares for resale to the public.
Method of Shares
Original Issuance Beneficially Maximum No. of
Date of (i.e. purchase, Owned Prior to Shares to be Sold
Name of Original gift, etc.) Offering (1) Pursuant to this
----------- ------------
Security Holder Issue Prospectus
Frank Anjakos 9/4/96 Gift (4) 2,000 2,000
Cindy Baker 9/4/96 Gift (4) 2,000 2,000
Steve Bays 9/4/96 Gift (4) 2,000 2,000
Brain Delfs 9/4/96 Gift (4) 2,000 2,000
17
Method of Shares
Original Issuance Beneficially Maximum No. of
Date of (i.e. purchase, Owned Prior to Shares to be Sold
Name of Original gift, etc.) Offering (1) Pursuant to this
----------- ------------
Security Holder Issue Prospectus
James Delfs 9/4/96 Gift (4) 2,000 2,000
Sam Erbst 9/4/96 Gift (4) 2,000 2,000
Gus Fotinos 9/4/96 Gift (4) 2,000 2,000
Allyson Fox 9/4/96 Gift (4) 2,000 2,000
Audra Guthery 9/4/96 Gift (4) 2,000 2,000
David H. Hack 9/4/96 Gift (4) 2,000 50,000
Daniel Hodges (2) 9/4/96 For services 50,000 50,000
rendered (3)
Matthew S. Hodges 9/4/96 Gift (4) 2,000 2,000
Kim Lasater 9/4/96 Gift (4) 2,000 2,000
Jeff Milton 9/4/96 Gift (4) 2,000 2,000
Suzanne Morvay 9/4/96 Gift (4) 2,000 2,000
Mike Neighbors 9/4/96 Gift (4) 2,000 2,000
Thomas Nieman 9/4/96 Gift (4) 2,000 2,000
Ron Olson 9/4/96 Gift (4) 2,000 2,000
Mark Polifka 9/4/96 Gift (4) 2,000 2,000
18
Method of Shares
Original Issuance Beneficially Maximum No. of
Date of (i.e. purchase, Owned Prior to Shares to be Sold
Name of Original gift, etc.) Offering (1) Pursuant to this
----------- ------------
Security Holder Issue Prospectus
Sophie Radecki 9/4/96 Gift (4) 2,000 2,000
Jonathan Roberts 9/4/96 Gift (4) 50,000 50,000
Lowell E. Robinson 9/4/96 Gift (4) 2,000 2,000
Monica Romero 9/4/96 Gift (4) 2,000 2,000
Melissa Saucedo 9/4/96 Gift (4) 2,000 2,000
Kevin Sherlock 9/4/96 Gift (4) 50,000 50,000
Howard Smith 9/4/96 Gift 2,000 2,000
John Sylvester 9/4/96 Gift (4) 2,000 2,000
Raymond Willey 9/4/96 Gift (4) 2,000 2,000
Jennifer L. Worden 9/4/96 Gift (4) 2,000 2,000
(1) On October 20, 1999, the outstanding shares of the Company's common
stock were forward split 1,000 to 1, resulting in a total of 1,000,000
shares outstanding. (2) Former officer and director of the Company.
(3) These shares were issued in reliance on Section 4(2) of the Securities
Act. In consideration of Mr. Hodges contributing $450 toward the
organizational expenses of the Company, and for $350 in services rendered,
on November 4, 1997, the Company issued Mr. Hodges 800 shares of it's
common stock. (4) These shares were issued to individuals as gifts by the
Company's founder, Daniel Hodges, in reliance on there being no "sale" as
defined in Section 4(2) of the Securities Act, for U. S. residents, or
Regulation S, for Allyson Fox and Sophie Radecki, Canadian residents. No
consideration was received in exchange for the share issuances. The shares
were gifted to individuals whom Mr. Hodges knew either through familial
relationships or business associations. Mr. Hodges also selected
individuals who could provide some potential for introducing Alph-Net to
potential merger or acquisition candidates or business opportunities as
well as individuals who were willing to provide Alph-Net with clerical
services for no cash renumeration. The Company's current president and
director, Patrick McKnight is the husband of Kathy McKnight, secretary and
director. There are no other known relationships between any of the
shareholders, except that Matthew Hodges is the adult nephew of Mr. Hodges,
Jennifer Worden is the wife of Mr. Hodges, and Brian Delfs and James Delfs
are brothers.
19
- --------------------------------------------------------------------------------
State by State Tabulation of Selling Shareholders
- --------------------------------------------------------------------------------
Arizona 242,000
- ---------------------------------------- ---------------------------------------
California 4,000
- ---------------------------------------- ---------------------------------------
Canada 4,000
- ---------------------------------------- ---------------------------------------
All of the shares offered by this prospectus may be offered for resale, from
time to time, by the selling shareholders in one or more private or negotiated
transactions, in open market transactions in the over-the-counter market, or
otherwise, or by a combination of these methods, at fixed prices that may be
changed, at market prices prevailing at the time of the sale, at prices related
to such market prices, at negotiated prices, or otherwise. The selling
shareholders may effect these transactions by selling their shares directly to
one or more purchasers or to or through broker-dealers or agents. The
compensation to a particular broker-dealer or agent may be more or less than
customary commissions depending upon the arrangement negotiated by a selling
shareholder with a broker-dealer. Each of the selling shareholders may be deemed
an "underwriter" within the meaning of the Securities Act in connection with
each sale of shares. The selling shareholders will pay all commissions, transfer
taxes and other expenses associated with their sales.
Management's discussion and analysis of financial
condition and plan of operations
We ask that you read the following discussion in conjunction with Alph-Net's
consolidated financial statements, including the accompanying notes, which
appear elsewhere in this prospectus.
Company overview
Alph-Net Consulting Group, Ltd. was organized under the laws of the state of
Nevada on April 15, 1996. On December 31, 2001, the Company closed on the
purchase of the assets and liabilities of McKnight Consulting LLC.
We are a technical consulting company whose primary focus is in developing,
supporting, designing, and implementing computer connectivity solutions with
small to mid-sized companies nationwide and providing research and technical
consulting specializing in social science research and technology that supports
efforts in research. Efforts are focused on research design, methodology and
statistics in formulating sound research design proposals. These services
20
include network design, configuration, management, administration, programming,
and evaluation. In addition to these services, database connectivity and server
application management is offered when these services are integrated into the
network design.
Results of Operations.
The Company had sales revenues for the period ended December 31, 2001 in the
amount of $36,455 compared to $23,611 for he same period in 2000.
The costs of sales revenues for the period ended December 31, 2001 was $37,301
compared to $10,693 for the same period in 2000. This increase was due in large
part to the reduction in our sales margin as a result of competition. The
Company had general and administrative expenses for the period ended December
31, 2001 in the amount of $24,070, compared to general and administrative
expenses of $10,766 for 2000. This increase in general and administrative
expenses for 2001 was due to the Company's relocation of an office from Seattle,
Washington to Tucson, Arizona.
The Company recorded a net loss of $27,415 for the year ended December 31, 2001
compared to a net income of $78 for the comparable period in 2000. The loss for
2001 was due primarily to the Company's low margin on its costs of goods sold
and the general and administrative expenses associated with its office move.
At December 31, 2001, the Company had total current assets of $15,409 as
compared to $45,980 current assets at December 31, 2000. The decrease in total
current assets was due to the elimination of the Company's inventory resulting
from the conversion to an on demand inventory system due to the short shelf life
of computer related inventory. The Company now only orders inventory on an as
needed basis. The Company had net working capital of $11,226 at December 31,
2001, compared to net working capital of $36,675 at December 31, 2000.
Net stockholders' equity in the Company was $18,738 as of December 31, 2001 and
$43,742 at December 31, 2000.
Liquidity and Capital Resources.
The Company remains in the development stage and, since inception, has
experienced no significant change in liquidity, capital resources or stockholder
equity. The Company's balance sheet as of December 31, 2001 reflects a current
asset value of $15,409, and a total asset value of $22,921.
The Company has sufficient funds to continue its current level of operations.
The Company will not have sufficient funds, unless it is able to raise funds in
a private placement, to undertake any significant development, marketing and
manufacturing of its business.
21
Business
We are a technical consulting company whose primary focus is in developing,
supporting, designing, and implementing computer connectivity solutions with
small to mid-sized companies nationwide and providing research and technical
consulting specializing in social science research and technology that supports
efforts in research. Efforts are focused on research design, methodology and
statistics in formulating sound research design proposals. These services
include network design, configuration, management, administration, programming,
and evaluation. In addition to these services, database connectivity and server
application management is offered when these services are integrated into the
network design.
Smaller companies often lack in-house technical expertise necessary for
understanding the full range of available solutions. Slightly larger companies
in the range of mid-sized companies with fewer than 1,000 employees may have
technically capable individuals, however, their ability to be objective
decision-makers may be compromised by company policy or power hierarchies. We
have provided services to this targeted market for over 8 years as a sole
proprietorship and, at this time, we believe it is in the interest of the
company to expand the range of offerings and expand operations to enlist more
specialists.
Since the mid-1990's, technical consulting has been building nationwide at an
ever increasing rate. Businesses recognize the need to confer with outside
organizations to understand the nature and extent of internal problems.
Technical consulting has been the benefactor of this need that is often caused
by the ever-growing computer industry and rapid expansion of technical
solutions. Over a 4 year period in the late 1990's, computer communication
speeds increased 100 times! In addition to the speed increases, the number of
methods to implement computer networks has risen from 4 in 1990 to over 20 in
2001. These facts lead many companies to rely on outside sources to assist in
the evaluation of their current infrastructure and assess methods to change the
infrastructure for future compatibility.
The Company offers technical consulting for computer connectivity. These
services include network design, configuration, management, administration,
programming, and evaluation. In addition to these services, database
connectivity and server application management is offered when these services
are integrated into the network design.
Within the next three to five years, we expect to enhance revenues by expanding
the domain of our consulting activities to include network application hosting
and design. In addition, revenue may be expected by adding formal evaluation
methodologies that will fully delineate the source and nature of existing
technical problems. The activities that may place financial burden on the
company include: Recruitment of personnel for programming and database
management; Lost revenue resulting from recruitment process; marketing costs;
inventory acquisition costs.
Properties.
Alph-Net has a working agreement with one of its shareholders for use of office
space supplied free of charge to Alph-Net. Alph-Net has no property.
Competition.
The computer connectivity consulting services market is extremely competitive
and most of our competitors are more established and have greater financial
22
resources. In addition, there are no substantial barriers to entry in this
market. We also expect that competition will intensify in the future. Most of
our competitors have greater market presence, engineering and marketing
capabilities and financial, technological and personnel resources than we do.
The Company's current and prospective competitors generally may be divided into
the following three groups: Web hosting companies, Internet solution companies,
and Internet connectivity and security providers. We believe that we may also
face competition from other computer hardware and software companies and other
media, technology and telecommunications companies. The number of businesses
providing connectivity-related services is rapidly growing.
As a result of increased competition and consolidation in the industry, we could
encounter significant pricing pressure, which in turn could result in
significant reductions in the average selling price of our services. We may not
be able to offset such price reductions even if we obtain an increase in the
number of our customers, derive higher revenue from enhanced services or manage
to reduce costs. Increased price or other competition could erode market share
and could significantly hurt business. We cannot assure you that we will have
the financial resources, technical expertise or marketing and support
capabilities to compete successfully in that environment.
Regulation.
We are not currently subject to direct regulation by the Federal Communications
Commission ("FCC") or any other governmental agency, other than regulations
applicable to businesses in general. However, in the future, we may become
subject to regulation by the FCC or another regulatory agency. Our business
could suffer depending on the extent to which our activities are regulated or
proposed to be regulated.
While there are currently few laws or regulations that specifically regulate
Internet communications, laws and regulations directly applicable to online
commerce or Internet communications are becoming more prevalent. There is much
uncertainty regarding the market-place impact of these laws. In addition,
various jurisdictions already have enacted laws covering intellectual property,
privacy, libel and taxation that could affect our business by virtue of their
impact on online commerce. Further, the growth of the Internet, coupled with
publicity regarding Internet fraud, may lead to the enactment of more stringent
consumer protection laws. If the Company becomes subject to claims that we have
violated any laws, even if we successfully defend against these claims, our
business could suffer. Moreover, new laws that impose restrictions on our
ability to follow current business practices or increase our costs of doing
business could hurt our business.
Patents.
The Company owns no patents.
23
Employees.
We have two full-time employees. None of the Company's employees is represented
by a union. We consider our relations with employees to be satisfactory.
Legal proceedings.
Alph-Net is not subject to any pending litigation, legal proceedings or claims.
Management
Executive officers, key employees and directors.
Pursuant to the closing of the acquisition of the assets and liabilities of
McKnight Consulting, on December 31, 2001 the Company had a change in
management. Patrick McKnight was appointed President and Director, while Kathy
McKnight was appointed Secretary and Director. The Company's founder, Daniel
Hodges, resigned from his position with the Company on December 31, 2001.
A member of the Board of Directors of the Company serves until the next annual
meeting of shareholders, or until the member's successor has been elected. An
officer serves at the pleasure of the Board of Directors.
Currently, there two officers and directors of the Company:
Name Age Position
Patrick E. McKnight 35 President, Director
Kathy McKnight 38 Secretary, Director
Patrick McKnight has been involved in the program development of the business
since its inception. He provides expertise in the technical areas including
computer applications, software development, statistical analysis, and technical
writing. In addition, Mr. McKnight handles the day-to-day business operations
and decisions.
Kathy McKnight has been involved in the business since 1995 and continues to
serve as the secretary and specialist for program implementation and customer
care/service. Her main responsibilities include grant application preparation,
client consultation, and information dissemination, purchasing and long-term
planning.
Executive compensation.
No employment compensation has been paid by the Company.
24
The Company has no employment agreements with any persons. No retirement,
pension, profit sharing, stock option or insurance programs or other similar
programs have been adopted by the Company for the benefit of any employees.
Employment agreements.
Alph-Net has no employment agreements with any persons.
Principal shareholders.
The following table presents certain information regarding beneficial ownership
of the Company's common stock as of Febraury 1, 2002, by (i) each person known
by the Company to be the beneficial owner of more than 5% of the outstanding
shares of common stock, (ii) each director and executive officer of the Company,
and (iii) all directors and executive officers as a group. Unless otherwise
indicated, each person in the table has sole voting and investment power as to
the shares shown.
Name and
Title of address of Amount of Percent
Class Beneficial Beneficial of
Owner ownership Class
Common Patrick E. McKnight 375,000 37.5%
President and Director
2110 E. Water Street
Tucson, AZ 85719
Common Kathy McKnight 375,000 37.5%
Secretary and Director
2110 E. Water Street
Tucson, AZ 85719
Common All directors 750,000 75%
and officers
as a group
Certain transactions
On September 4, 1996, the Company issued a total of 1,000 shares of its common
stock in the following manner. In consideration of Mr. Hodges contributing
25
toward the organizational expenses of the Company and for services rendered, the
Company issued Mr. Hodges 800 shares of its common stock. On July 5, 1999, the
outstanding shares were forward split 1,000 to 1 and the par value was changed
to $.001, resulting in a total of 1,000,000 shares outstanding.
On December 31, 2001, pursuant to the closing of the contribution agreement and
the acquisitions of the assets and liabilities of McKnight Consulting LLC, the
company issued a total of 750,000 shares, 375,000 to Patrick McKnight and
375,000 to Kathy McKnight. Additionally, on December 31, 2001, the company
received and cancelled 750,000 shares of common stock from Daniel Hodges as
required by the contribution agreement.
Description of securities
The Company is authorized to issue 100,000,000 shares of common stock, $.001 par
value per share, of which 1,000,000 shares are issued and outstanding at
February 1, 2002.
Holders of the common stock are entitled to one vote for each share owned for
all matters to be voted on by the shareholders. There is no cumulative voting in
the election of directors. Accordingly, each shareholder is entitled to vote the
number of shares owned by him for as many persons as there are directors to be
elected. Holders of common stock are entitled to receive such dividends as may
be declared from time to time by the Board of Directors out of funds legally
available therefore and, in the event of liquidation, dissolution or winding up
of the Company, to share ratably in all assets remaining after payment of
liabilities. We have not paid cash dividends on our common sock. It is the
policy of our board of directors to retain future earnings to finance the growth
and development of our business. Any future dividends will be at the discretion
of our board of directors and will depend upon our financial condition, capital
requirements, earnings, liquidity, and other factors that it may deem relevant.
The holders of common stock have no preemptive or conversion rights. The holders
of common stock are not subject to further calls or assessments. There are no
redemption or sinking fund provisions applicable to the common stock. The rights
of the holders of the common stock are subject to any rights that may be fixed
for holders of preferred stock, when and if any preferred stock is issued. The
common stock currently outstanding is validly issued, fully paid and not
assessable.
There are no outstanding options or warrants of any kind for the Company's
common stock.
Transfer agent, warrant agent and registrar
The transfer agent, warrant agent and registrar for the common stock is Holladay
Stock Transfer, 2939 67th Place, Scottsdale, AZ 85251.
Shares eligible for future sale
Upon the effectiveness of this registration statement, Alph-Net will have
250,000 shares of common stock outstanding and registered for resale by the
selling shareholders under the Securities Act of 1933.
Prior to this offering, no public trading market has existed for Alph-Net's
shares of common stock. The sale, or availability for sale, of substantial
amounts of common stock in the public trading market could adversely affect the
market prices for Alph-Net's common stock.
26
Plan of distribution
To our knowledge, none of the selling shareholders has made any arrangement with
any brokerage firm for the sale of the shares. We have been advised by the
selling shareholders that they presently intend to dispose of the shares through
broker-dealers in ordinary brokerage transactions at market prices prevailing at
the time of the sale. The selling shareholders and their affiliates are limited
in offering and selling the shares and are prohibited from directly or
indirectly bidding for or purchasing shares of the Alph-Net's common stock, or
attempting to induce any person to do so, until the offering by the selling
shareholders is completed.
Any broker-dealers or agents who act in connection with the sale of the shares
may be deemed to be underwriters. Any discounts, commissions or concessions
received by any broker-dealers or agents may be deemed to be underwriting
discounts and commissions under the Securities Act.
Alph-Net has not registered its shares for resale under the securities or blue
sky laws of any state and has no plans to register or qualify its shares in any
state. Current shareholders and persons who desire to purchase the shares in any
trading market that may develop in the future, should be aware that there may be
significant state blue sky restrictions upon the ability of new investors to
purchase the securities. These restrictions could reduce the size of any
potential trading market. Under federal law, non-issuer trading or resale of
Alph-Net's common stock may be exempt from most state registration or
qualification requirements. However, some states may continue to restrict the
ability to register or qualify Alph-Net's common stock for both initial sale and
secondary trading by regulations prohibiting or imposing limitations on the sale
of securities of blank check issuers.
Alph-Net's selling efforts, and any secondary trading market which may develop,
may only be conducted in those jurisdictions where an applicable exemption is
available or where the shares have been registered. Alph-Net has no current plan
to register its shares for offer and sale within any state. Alph-Net does not
anticipate that a secondary trading market for the shares will develop in any
state until after the consummation of a merger or acquisition, if at all.
However, investors should be aware that state law limitations might affect the
transferability or the ability to resell the shares. Alph-Net has not taken, and
does not contemplate taking, any steps to ensure compliance with state
securities laws.
Legal matters
The validity of the common stock subject to this offering will be passed upon
for us by Christopher Dieterich, Esq., Dieterich & Associates, Los Angeles,
California.
Experts
The audited financial statements for the period ended December 31, 2001,
included in this prospectus have been provided by Robison, Hill & Co. Certified
Public Accountants and have been so included in reliance on the report of
Robison, Hill & Co., independent accountants, given on their authority as
experts in auditing and accounting.
27
Additional information
Alph-Net has filed with the SEC a registration statement on Form SB-2 under the
Securities Act of 1933, with respect to 250,000 of its issued and outstanding
shares of common stock. This prospectus, which forms a part of the registration
statement, does not contain all of the information set forth in the registration
statement as permitted by applicable SEC rules and regulations. Statements in
this prospectus about any contract, agreement or other document are not
necessarily complete. With respect to each such contract, agreement, or document
filed as an exhibit to the registration statement, reference is made to the
exhibit for a more complete description of the matter involved, and the validity
of each such statement is limited by this reference.
Copies of our reports, proxy statements and other information may be inspected
and copied, and can also be obtained by mail at prescribed rates from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, or
by calling the SEC at 1-800-SEC-0330. The SEC maintains a Web site that include
reports, proxy statements and other information. The address of the SEC Web site
is http://www.sec.gov.
Alph-Net will furnish to its shareholders annual reports containing audited
financial statements reported on by independent public accountants for each
fiscal year and make available quarterly reports containing unaudited financial
information for the first three quarters of each fiscal year.
28
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
ALPH-NET CONSULTING GROUP, LTD.
-:-
INDEPENDENT AUDITOR'S REPORT
DECEMBER 31, 2001 AND 2000
CONTENTS
Page
Independent Auditor's Report...............................................................................F - 1
Balance Sheets
December 31, 2001 and 2000..............................................................................F - 2
Statements of Operations for the
Years Ended December 31, 2001 and 2000...................................................................F - 3
Statement of Stockholders' Equity for the
Years Ended December 31, 2001 and 2000..................................................................F - 4
Statements of Cash Flows for the
Years Ended December 31, 2001 and 2000 .................................................................F - 5
Notes to Financial Statements..............................................................................F - 6
29
INDEPENDENT AUDITOR'S REPORT
Alph-Net Consulting Group, Ltd.
We have audited the accompanying balance sheets of Alph-Net Consulting
Group, Ltd. as of December 31, 2001 and 2000, and the related statements of
operations, cash flows and stockholders' equity for the two years ended December
31, 2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Alph-Net Consulting
Group, Ltd. as of December 31, 2001 and 2000, and the results of its operations
and its cash flows for the two years ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States of America.
Respectfully submitted
/S/ ROBISON, HILL & CO.
Certified Public Accountants
Salt Lake City, Utah
January 30, 2002
30
ALPH-NET CONSULTING GROUP, LTD.
BALANCE SHEETS
December 31,
-------------------------------
2001 2000
--------------- ---------------
ASSETS
Current Assets:
Cash and Cash Equivalents $ 4,925 $ 7,553
Accounts Receivable 10,484 6,919
Inventory - 31,508
--------------- ---------------
Total Current Assets 15,409 45,980
--------------- ---------------
Fixed Assets:
Office Equipment 13,822 10,877
Less Accumulated Depreciation (6,310) (3,810)
--------------- ---------------
Net Fixed Assets 7,512 7,067
--------------- ---------------
Total Assets $ 22,921 $ 53,047
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts Payable $ 3,470 $ 5,065
Credit Cards Payable - 3,848
Payroll Taxes Payable - 119
Sales Tax Payable 713 273
--------------- ---------------
Total Liabilities 4,183 9,305
--------------- ---------------
Stockholders' Equity:
Owners' Equity - 43,742
Common Stock, Par value $.001
Authorized 100,000,000 shares,
Issued 1,000,000 shares at
December 31, 2001 and 2000 1,000 -
Paid-In Capital 42,655 -
Retained Deficit (24,917) -
--------------- ---------------
Total Stockholders' Equity 18,738 43,742
--------------- ---------------
Total Liabilities and Stockholders' Equity $ 22,921 $ 53,047
=============== ===============
The accompanying notes are an integral part of these financial
statements.
31
ALPH-NET CONSULTING GROUP, LTD.
STATEMENTS OF OPERATIONS
For the Years Ended
December 31,
-------------------------------
2001 2000
--------------- ---------------
Revenues:
Net Sales $ 36,455 $ 23,611
Cost of Goods Sold 37,301 10,693
--------------- ---------------
Gross Profit (Loss) (846) 12,918
Expenses:
General and Administrative 24,070 10,766
Depreciation 2,499 2,074
--------------- ---------------
Profit (Loss) Before Taxes (27,415) 78
Income Taxes - -
--------------- ---------------
Net Income ( Loss) (27,415)$ 78
=============== ===============
Basic & Diluted loss per share $ (9.10) $ -
=============== ===============
The accompanying notes are an integral part of these financial
statements.
32
ALPH-NET CONSULTING GROUP, LTD.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE TWO YEARS ENDED DECEMBER 31, 2001
Common Stock Paid-In Retained Member's
Shares Par Value Capital Deficit Equity
------------ ----------- --------- ----------- -------------
Balance at December 31, 1999 - $ - $ - $ - $ 43,664
Net Income - - - - 78
------------ ----------- --------- ----------- -------------
Balance at December 31, 2000 - - - - 43,742
April 2001, Distribution to LLC
Members - - - - (7,176)
December 31, 2001, Merger with
Alph-Net Consulting Group, Ltd. 1,000,000 1,000 35,566 - (36,566)
Capital Contributed by Shareholder - - 7,089 - -
Net Loss - - - (27,415) -
------------ ----------- --------- ----------- -------------
Balance at December 31, 2001 1,000,000 $ 1,000 $ 42,655 $ (27,415) $ -
============ =========== ========= =========== =============
The accompanying notes are an integral part of these financial
statements.
33
ALPH-NET CONSULTING GROUP, LTD.
STATEMENTS OF CASH FLOWS
For the Years Ended
December 31,
-------------------------------
2001 2000
--------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (24,917) $ 78
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 2,500 2,074
Change in Operating Assets and Liabilities:
(Increase) Decrease in Accounts Receivable (3,565) 4,546
(Increase) Decrease in Inventory 31,508 (2,431)
Increase (Decrease) in Accounts Payable (1,595) 303
Increase (Decrease) in Sales Tax Payable 440 (1,038)
Increase (Decrease) in Credit Cards Payable (3,848) -
Increase (Decrease) in Payroll Taxes Payable (119) -
--------------- --------------
Net Cash Used in Operating Activities 404 3,532
--------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Equipment (2,945) (1,011)
--------------- --------------
Net cash provided by Investing Activities (2,945) (1,011)
--------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributed by shareholder 7,089 (13)
Distribution to LLC Members (7,176) -
--------------- --------------
Net Cash Provided by Financing Activities (87) (13)
--------------- --------------
Net (Decrease) Increase in Cash and Cash Equivalents (2,628) 2,508
Cash and Cash Equivalents at Beginning of Period 7,553 5,045
--------------- --------------
Cash and Cash Equivalents at End of Period $ 4,925 $ 7,553
=============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ -
Franchise and income taxes $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES: None
The accompanying notes are an integral part of these financial
statements.
34
ALPH-NET CONSULTING GROUP, LTD.
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED DECEMBER 31, 2001 AND 2000
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies for Alph-Net Consulting Group, Ltd.
is presented to assist in understanding the Company's financial statements. The
accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements.
Organization and Basis of Presentation
The Company was incorporated under the laws of the State of Nevada on
April 15, 1996. The Company ceased all operating activities during the period
from April 15, 1996 to July 12, 1999 and was considered dormant. On July 12,
1999, the Company obtained a Certificate of renewal from the State of Nevada.
From July 12, 1999 to December 31, 2001, the Company was in the development
stage.
On December 31, 2001, the Company finalized a merger with McKnight
Consulting, LLC. The Company acquired McKnight Consulting and all of its assets
and liabilities in exchange for 750,000 shares of common stock. Since the
merger, the Company is no longer considered a development stage entity.
Nature of Business
McKnight Consulting is a research and technical consulting firm
specializing in social science research and technology that supports efforts in
research. Efforts are focused on research design, methodology and statistics in
formulating sound research design proposals. Additionally, McKnight Consulting
offers technical and computer consulting related to the research process.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles required 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 during the
reporting period. Actual results could differ from those estimates.
35
ALPH-NET CONSULTING GROUP, LTD
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED DECEMBER 31, 2001 AND 2000
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Loss per Share
The reconciliations of the numerators and denominators of the basic loss
per share computations are as follows:
Per-Share
Income Shares Amount
------ ------ ------
(Numerator) (Denominator)
For the year ended December 31, 2001
Basic Loss per Share
Loss to common shareholders $ (24,917) 2,740 $ (9.10)
=============== =============== ==============
The Company, was a Limited Liability Company as of December 31, 2001,
thus earnings per share is not applicable and was not calculated for December
31, 2000.
There are no common stock equivalents for December 31, 2001.
Fixed Assets
The office equipment is stated at cost and will be depreciated, on a
straight-line basis, over their estimated useful lives of five years.
The Company has adopted the Financial Accounting Standards Board SFAS
No., 121, "Accounting for the Impairment of Long-lived Assets." SFAS No. 121
addresses the accounting for (i) impairment of long-lived assets, certain
identified intangibles and goodwill related to assets to be held and used, and
(ii) long-live lived assets and certain identifiable intangibles to be disposed
of. SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. If the sum of the expected future cash flows from the
used of the asset and its eventual disposition (un-discounted and without
interest charges) is less than the carrying amount of the asset, an impairment
loss is recognized.
Inventory
Inventories are stated at the lower of cost or market.
36
ALPH-NET CONSULTING GROUP, LTD.
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED DECEMBER 31, 2001 AND 2000
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of
credit risk such as foreign exchange contracts, options contracts or other
foreign hedging arrangements. The Company maintains the1 majority of its cash
balances with one financial institution, in the form of demand deposits.
NOTE 2 - INCOME TAXES
As of December 31, 2001, the Company had a net operating loss
carryforward for income tax reporting purposes of approximately $25,000 that may
be offset against future taxable income through 2021. Current tax laws limit the
amount of loss available to be offset against future taxable income when a
substantial change in ownership occurs. Therefore, the amount available to
offset future taxable income may be limited. No tax benefit has been reported in
the financial statements, because the Company believes there is a 50% or greater
chance the carryforwards will expire unused. Accordingly, the potential tax
benefits of the loss carryforwards are offset by a valuation allowance of the
same amount.
NOTE 3 - COMMITMENTS
As of December 31, 2001 all activities of the Company have been
conducted by corporate officers from either their homes or business offices.
Currently, there are no outstanding debts owed by the company for the use of
these facilities and there are no commitments for future use of the facilities.
NOTE 4 - MERGER
On December 31, 2001, the Company finalized a reverse merger with
McKnight Consulting, LLC. The Company, acquired McKnight Consulting and all of
its assets and liabilities in exchange for 750,000 shares of Common Stock or 75%
of the New Common Stock outstanding subsequent to the Merger.
37
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Nevada Business Associations Act Title 7, Chapter 78, the articles of
incorporation may contain a provision eliminating or limiting the personal
liability of a director or officer to the corporation or its stockholders for
damages for breach of fiduciary duty. If this type of limiting provision is
included in articles of incorporation, such a provision cannot eliminate or
limit the liability of a director or officer for (a) acts or omissions that
involve intentional misconduct, fraud or a knowing violation of law or (b) the
payment of an unlawful distribution to stockholders.
The Alph-Net's Articles of Incorporation contain the provision that no director
or officer of the Alph-Net shall be personally liable to the Alph-Net or any of
its stockholders for damages for breach of fiduciary duty as a director or
officer involving any act or omission of any such director or officer; provided,
however, that the foregoing provision shall not eliminate or limit the liability
of a director or officer (i) for acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law, or (ii) the payment of
dividends in violation of Section 78.300 of the Nevada Revised Statutes. The
Alph-Net's By-Laws provide that the Alph-Net shall indemnify any and all of its
directors and officers, and its former directors and officers, or any person who
may have served at the Alph-Net's request as a director or officer of another
corporation in which it owns shares of capital stock or of which it is a
creditor, against expenses actually and necessarily incurred by them in
connection with the defense of any action, suit or proceeding in which they, or
any of them, are made parties, or a party, by reason of being or having been
director(s) or officer(s) of the Alph-Net, or of such other corporation, except,
in relation to matters as to which any such director or officer or former
director or officer or person shall be adjudged in such action, suit or
proceeding to be liable for negligence or misconduct in the performance of duty.
Such indemnification shall not be deemed exclusive of any other rights to which
those indemnified may be entitled, under By-Law, agreement, vote of shareholders
or otherwise.
ITEM 25. OTHER EXPENSES OF ISSUANCES AND DISTRIBUTION
Alph-Net estimates that expenses in connection with the offering described in
this registration statement (other than the underwriting discount and
commissions and reasonable expense allowance) will be as follows:
38
SEC registration fee................................................... $ 100
Printing and engraving expenses........................................$ 2,000*
Accounting fees and expenses...........................................$ 5,000*
Legal fees and expenses (other than Blue Sky)..........................$15,000*
Blue sky fees and expenses (including legal and filing fees)...........$ 1,000*
Miscellaneous..........................................................$ 1,000*
-------
Total..............................................................$24,100*
=======
*Estimated Amounts.
All expenses of the registration of the shares will be borne by the Company.
ITEM 26..RECENT SALES OF UNREGISTERED SECURITIES
On September 4, 1996, the Company issued a total of 1,000 shares of its common
stock in the following manner. In consideration of Mr. Hodges contributing
toward the organizational expenses of the Company and for services rendered, the
Company issued Mr. Hodges 800 shares of its common stock. On July 5, 1999, the
outstanding shares were forward split 1,000 to 1 and the par value was changed
to $.001, resulting in a total of 1,000,000 shares outstanding.
On December 31, 2001, pursuant to the closing of the contribution agreement and
the acquisitions of the assets and liabilities of McKnight Consulting LLC, the
company issued a total of 750,000 shares, 375,000 to Patrick McKnight and
375,000 to Kathy McKnight. Additionally, on December 31, 2001, the company
received and cancelled 750,000 shares of common stock from Daniel Hodges as
required by the contribution agreement.
ITEM 27..EXHIBITS
(a)......The following exhibits are filed as part of this registration
statement:
EXHIBIT
NUMBER DESCRIPTION
3.1* Articles of Incorporation of Alph-Net
3.2* Amendment to Articles of Incorporation of Alph-Net
3.3* By-Laws
4.1 Form of Common Stock Certificate
5.1 Opinion of Christopher Dieterich, Esquire
23.1 Consent of Robinson, Hill & Co.
23.2 Consent of Christopher Dieterich, Esquire
(included as part of Exhibit 5.1)
* previously filed
39
ITEM 28. UNDERTAKINGS
(a) The undersigned company hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) Include any additional or changed material information
on the plan of distribution.
(2) For determining liability under the Securities Act, each
post-effective amendment shall be treated as a new registration statement of the
securities offered, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of Alph-Net
pursuant to the foregoing provisions, or otherwise, Alph-Net has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Alph-Net of expenses
incurred or paid by a director, officer or a controlling person of Alph-Net in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Alph-Net will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of competent
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
40
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the city of Tucson,
state of Arizona, on February 28, 2002.
ALPH-NET CONSULTING GROUP, LTD.
BY: /s/ Patrick E. McKnight
----------------------------------------
Patrick E. McKnight, President,
signing in his capacity as principal executive officer, principal
accounting officer and director
BY: /s/ Kathy McKnight
----------------------------------------
Kathy McKnight, Secretary,
signing in her capacity as secretary and director
41