page 6
<PAGE>
We have authorized and issued a total of 1,000,000 shares of Class A
Convertible Preferred shares ("Preferred Shares") to our CEO Alex Kanakaris.
Each of the Preferred Shares will carry twenty (20) non-cumulative votes per
share subject to ratification by a majority of shareholders. Majority
shareholder ratification will be forthcoming. As a result of his holding the
Preferred Shares and his holding of certain Common Stock shares, Mr.
Kanakaris along with certain of our other key employees and board members
controls our decisions and the majority vote required for most significant
transactions and events under Nevada law. See "Management and Control",
"Description of Securities: Description of Class A Convertible Preferred
Stock".
WE MAY NOT BE ABLE TO REGISTER CERTAIN DOMAIN NAMES AND WE MAY HAVE A CONFLICT
WITH THE USE OF CERTAIN SYMBOLS
We currently hold the Internet domain name "kanakaris.com". Our symbol for
trading on the Bulletin Board is now "KKRS". Our symbol before using KKRS was
KANA. On Wednesday, July 28, 1999, we changed our trading symbol to KKRS because
NASDAQ informed us that another entity had already reserved the name for trading
on the NASDAQ SmallCap market and as such took precedence over our use of the
name on the Bulletin Board. We may not again be able to use the symbol "KANA".
We may also have further difficulty with the use or application of the symbol
KKRS.
On June 7, 1999 we received a letter from Teknon Corporation alleging that
they held a trademark on the mark "Netbooks." We have used the name Netbooks
since January of 1998. We are currently determining whether to resolve the
issue with Tecknon Corporation's counsel and pay a royalty for the use of the
name or cease from further use of the name. We may not be able to use the
mark or name "Netbooks" in the future.
OUR WEBSITE OPERATIONS ARE CURRENTLY BEING DEVELOPED
The success of our company depends mostly on the success of our Website. We are
currently and continually updating and developing our Website. Some of the
challenges to defining our site include completing development of downloadable
content, cost effective ways to drive traffic to our site, attracting
advertisers to our site, incorporating new technology to expand bandwidth on our
site, reaching alliances with key companies to help us grow our site and traffic
to the site, stabilizing the site from a maintenance perspective, and customer
service on the site.
RISKS ASSOCIATED WITH THE WEBSITE
Our website is subject to the risk of severe competition from other companies
like AOL, Netscape, Spinner, MP3, Amazon.com and others. We may also get
competition from new large entrants to the downloadable market such as Warner
Brothers, Disney, MGM, Paramount, Columbia, Simon and Schuster and others. We
may not be able to compete successfully.
Our website is also self-hosted meaning that we actually maintain our servers
ourselves. In case of electronic or natural disaster or overload our site may
encounter a serious disruption of service which may negatively impact the price
of our Shares. System failures or power or services outages may also negatively
impact the ability to use our site and therefore effect our Share price.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer programs written using year
identifiers, consisting or two digits, rather than four. Use of two digits to
<PAGE>
identify years may cause certain systems to recognize a date using "00" as the
year 1900 rather than the year 2000. This may result in the failure or
miscalculation in businesses so as to cause disruption in the flow of business.
We have not verified that the companies with which we do business are year 2000
compliant. We also have not determined the year 2000 issue
THIS LIST OF RISK FACTORS MAY NOT BE COMPREHENSIVE. EACH PROSPECTIVE INVESTOR IS
CAUTIONED AND ADVISED TO MAKE HIS OWN INQUIRIES AND ANALYSIS WITH RESPECT TO OUR
CURRENT AND FUTURE BUSINESS PLANS.
<PAGE>
HOW WE INTEND TO USE THE PROCEEDS OF THIS OFFERING
We will use the proceeds from the sale of up to 3,000,000 Shares
offered to provide working capital for the Company and other costs associated
with the Offering. Not all of the proceeds from the Offering will be received by
the Company, as the selling shareholder of the Convertible Debenture will be
able to sell up to an additional 2,000,000 Shares in this Offering. The Company
has already or will receive the proceeds from the Convertible Debenture and upon
conversion, our debt obligation will be reduced by the amount of principal
converted into the Shares of the Company.
The following table shows how we intend to use of proceeds from this
Offering:
<TABLE>
<CAPTION>
USE OF PROCEEDS PERCENT
<S> <C>
Legal Fees 5%
Accounting Fees 5%
Working Capital/General overhead 35%
Technology 10%
Marketing 10%
Product/Content Procurement 10%
Acquisitions 15%
Research and Development 5%
Design 5%
-------
Total 100.00%
</TABLE>
We anticipate spending the funds from the Offering for the purposes
indicated above. If our expenditures are less than projected, we will retain
the difference and use it for general working capital purposes or allocated
according to the discretion of the Board of Directors. Conversely, if our
expenditures are more than the amounts anticipated above, we will be required
to draw from other sources such as revenues from operations and additional
financing activities such as private offerings of debt and equity. We will
deposit the net proceeds of this Offering that are not expended immediately
may be deposited in interest or non-interest bearing accounts, or invested in
government obligations, certificates of deposit, commercial paper, money
market mutual funds, or similar investments. Some of the proceeds have
already been received by the Company as principal loaned under the terms of
the Convertible Debenture. To the extent that we have already received funds
under the Convertible Debenture Agreement, they have or will be used for the
working capital requirements of the Company and will be reflected on the
Company's books as proceeds from equity sales by the Company rather than
outstanding debt obligations. To the extent that the conversion of debt into
Shares of the Company is less than the full amount convertible under the
terms of the Convertible Debenture Agreement, the resulting proceeds to be
allocated to equity sales by the Company will not occur and the debt
obligations of the Company will be retained. Therefore, any proceeds
allocated or to be used for general working capital purposes which would have
resulted from conversion of the underlying debt into equity in the Company
will be allocated to servicing the Company's debt obligation according to the
discretion of the Board of Directors. Conversely, to the extent that such
debt related expenditures require the utilization of funds in excess of the
amounts anticipated, supplemental amounts may be drawn from other sources,
including, but not limited to, general working capital and/or external
financing. The net proceeds of this offering that are not expended
immediately may be deposited in interest or non-interest bearing accounts, or
invested in government obligations, certificates of deposit, commercial
paper, money market mutual funds, or similar investments.
<PAGE>
OUR MANAGEMENT DETERMINED OUR OFFERING PRICE ARBITRARILY
The offering price is not based upon our net worth, total asset value, or any
other objective measure of value based upon accounting measurements. The
offering price was determined under Rule 457(g) of the Securities Act of 1933,
which states that where the securities to be offered pursuant to warrants or
other rights to purchase such securities the registration fee is to be
calculated upon the basis of the price at which the warrants or rights or
securities subject thereto are to be offered to the public. If such offering
price cannot be determined at the time of filing the registration statement, the
registration fee is to be calculated upon the basis of the highest of the
following: (1) the price at which the warrants or rights may be exercised, if
known at the time of filing the registration statement; (2) the offering price
of securities of the same class included in the registration statement; or (3)
the price of securities of the same class, as determined in accordance with
paragraph (c) of that Rule. Accordingly, the Shares are converted at the price
of $0.60 per share pursuant to the terms of the Convertible Debenture Agreement
which is the offering price for purposes of calculating the registration fee and
the offering price in this Prospectus.
This registration statement is filed in accordance with Rule 415 of the
Securities Act of 1933. The Offering is expected to begin immediately after the
effectiveness of the registration statement and to be completed within two
years. During that time, this prospectus may be modified to reflect a change in,
among other material items, the offering price of the Shares, to reflect changed
market conditions. |
