Wondering about that private placement, lolol? Here's the first part of the prospectus (lots of numbers in the rest; needs reformatting):
Cover sheet
ANY MANAGER INVESTING IN THIS DEAL WILL RECEIVE TOP PRIORITY FOR INCREASING ASSETS UNDER MANAGEMENT. WE WANT TO MAKE YOU THE DOMINANT MANAGER IN YOUR REGION THROUGH OUR DAILY LIVE DEAL AND INVESTMENT SHOW BROADCAST INTERNATIONALLY.
THE COMPANY IS SEEKING TO RAISE $10 MILLION TO FINANCE FURTHER APPLICATIONS OF ITS EXTENSIVE INTERNET TECHNOLOGY AND DEVELOPMENT OF [writing obscured]
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AMRHEIN FOLEY GROUP
23792 ROCKFIELD BLVD.
LAKE FOREST, CA. 92630
Message: Date: 10/28/99
ATTACHED PLEASE FIND A COPY OF THE EXECUTIVE SUMMARY FOR HITSGALORE.COM (HITT), A PROFITABLE BUSINESS TO BUSINESS SEARCH ENGINE PUBLIC COMPANY BASED IN CALIFORNIA. THE COMPANY IS SEEKING TO RAISE $10 MILLION TO FINANCE FURTHER APPLICATIONS OF ITS EXTENSIVE INTERNET TECHNOLOGY AND DEVELOPMENT OF ADDITIONAL PORTALS INCLUDING AN "INVESTMENT SUPER SITE SHOW".
1/2 OF THE PROCEEDS FROM THE $1.5MM NINE-MONTH BRIDGE NOTE WITH WARRANTS WITH A 12% ANNUAL COUPON WILL BE USED TO LAUNCH THE DAILY IPO AND INVESTMENTS SHOW.
WE HOPE YOUR FIRM CAN TAKE ADVANTAGE OF THIS SOON TO BE VERY POPULAR SITE TO INCREASE YOUR STOCK PRICE AS WELL AS SELL YOUR FIRM'S PRODUCTS AND SERVICES. PLEASE CONSIDER INVESTING IN THE BRIDGE NOTE TO LAUNCH THE SHOW. PLEASE CALL PETE FOLEY @949.470.9581 TO ARRANGE A CALL.
Pages including this cover page: 13
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AMRHEIN FOLEY GROUP
HITSGALORE.COM, INC.
EXECUTIVE SUMMARY
The Company
Hitsgalore.com (the "Company") was organized as a closely held Nevada corporation in July 1998 to develop a business to business website search engine and an internet revenue generating model. The initial search engine was launched in test mode in August 1998, mad came out of beta testing in November 1998.
Effective March 19, 1999, Hitsgalore.com completed a reorganization and reverse merger with Systems Communications, Inc. ("SCI"). SCI was incorporated in 1987 and made an initial public offering of its common stock in 1988. SCI was traded on the OTC Bulletin Board under the ticker symbol SCMI. Pursuant to the reorganization and reverse merger, the name of the surviving corporation was changed to Hitsgalore.com, Inc. All of the prior management of SCI resigned and were replaced by the management of Hitsgalore.com.
The principal office of the Company is located in Rancho Cucamonga, California. Hitsgalore.com also has an internet development center in Irvine, California. The Company has approximately 25 employees and three executive officers.
Business
The current business model of Hitsgalore.com is based on a business to business Ecommerce search engine where businesses can sponsor portal and other services, and members and sponsors can bid on their keyword rank on the search engine in return for business lead generation, a variety' of portal services and "click-throughs or hits" to their websites. The Company's website is located at hitsgalore.com. Hitsgalore's portal services are designed to drive quality business traffic to its sponsor and member customer base. The Company's revenues are principally derived from the sale of portal service sponsorships, membership keyword bid and rank rights and local city editions under its sales agreement with the Life Foundation Trust and others. Hitsgalore owns its entire core operating software and programming. The Company has also acquired a significant amount of intellectual property in its recent acquisition of Solvere Inc.
Hitsgalore.com strives to provide porn-free searching capabilities and does not accept or encourage any porn or adult content listings. The Company has virtually no head-to-head competition for its sponsor driven, portal service, porn free search model. The Company knows of only one other company that contains an element similar to the Hitsgalore.com search model. That company is GoTo.com, symbol (GOTO). GoTo. com is a NASDAQ company offering a "pay for performance" bid model. The site is advertiser driven and accepts porn advertisers.
Core Product Internet Business Model
The Company's core product business model is to give away a wide array of free portal services in exchange for sponsorship fees and membership/sponsor referrals. This membership model has been well accepted on the net since its inception. Hitsgalore.com has done very well attracting serious business minded individuals whose ventures range from home-based businesses to nationally recognized businesses.
The Company's core audience consists of people ranging from 35 to 50 years of age with annual household incomes of approximately $60,000. These user demographics are significant in that they match the portal services being offered by the Company. The Hitsgalore website is unique because of the demographics of the core audience and the portal services offered. The porn-free content of the Hitsgalore.com website is also important. Surveys show people "feel good" about using the Hitsgalore.com search engine because of its porn-free content.
Products and Services
The Company's portal services currently include free lifetime banner placements, free e banner generation, free real time stock quotes, free internet voice mail and free E-mail. The Company's most recent portal service is "Free Billboard(TM) Hits," a music portal.
Free Banner Placement. Free banner placements (miniature advertisements common throughout the world-wide web) allow website traffic to "click" and automatically gain access to the banner-owner's website. The free banner placements are designed to drive traffic (or "hits")to the sponsors' or members' business website. The banner-owner obtains a free banner made to order utilizing templates (free banner generation) provided free of charge by Hitsgalore. The free banners can be used anywhere on the internet and are placed into rotation on the Hitsgalore.com website. In many cases, this portal service provides the first opportunity for the banner owner to advertise on a website other than its own.
Free Real Time Quotes. Hitsgalore.com provides access to detailed stock quote information for companies listed on the New York Stock Exchange, NASDAQ, American Stock Exchange and Bulletin Boards, including current price (real time), open, change, high, low, earnings per share, volume, shares outstanding, market capitalization, dividend, ex-dividend date, price/earnings ratio and industry sector. A ticker look-up feature is also included.
Voice email (RocketTalk). RocketTalk allows users to send voice messages quickly and easily over the Internet to anyone, anywhere. With RocketTalk, clear, high-quality voice messages to other RocketTalk users can be sent. Or, if the intended recipient is not yet a RocketTalk user, RocketTalk will forward the message to the recipient's email address along with a small utility to play it.
Email ("HitsMail"). HitsMail is a state-of-the-art Web-based Internet email service. A HitsMail user is able to access fast, reliable and free email at any time from any location. HitsMail also provides many business-minded benefits and capabilities - allowing the user to take advantage of a Web-based email service that will grow with their needs.
Billboard Hits. Billboard Hits allows users to make their own custom CD with up to five songs for free from a library of titles from the 50s, 60s, 70s and 80s.
In order to obtain any of the portal services offered by Hitsgalore.com, the new member must register and provide Hitsgalore.com with certain relevant information, including a description of the business or service provided by the user, and the contact information for the business (location, phone number, email address, etc). This enables the Company to provide quality business leads to its sponsors and contact its new members to discuss other revenue generating products and services. As a result of the Company's business model, both the Company and the sponsor achieve value by building a database of potential customers who have voluntarily given their relevant contact and business information to Hitsgalore.com. New members are generally receptive to additional sales calls from Hitsgalore.com and the sponsor because the new members have received something of value, at no cost.
Sponsorships. Under the sponsorship program, sponsors acquire the right to "give away" the Company's portal services in exchange for lead generation. The sponsor is required to deposit a minimum of $99.00 with Hitsgalore.com in order to participate in the sponsorship program. The deposit is non-refundable. When a member orders a portal service, the sponsor, or sponsors, which are selected on a rotation basis from the Hitsgalore.com website, pay for the product or service on tile basis of an agreed upon "point" system. Each point is currently worth $0.495 as a reduction in the sponsors' deposit. The current program allows 200 points for each $99.00 deposit and the points charged to the sponsors' account currently range from one to four points each time the sponsor is selected to pay for a portal service. One or more sponsors may be selected to pay for a portal service based on the cost of the service or the product. In the case where more than one sponsor is selected to pay for the cost of the portal service or product, each participating sponsor receives an email of the ordering member's relevant business information. When the deposit is fully utilized, the Company bills the sponsor for additional sponsorship fees. As of September 30, 1999, the Company has a total of approximately 3,000 sponsors and a membership base of over 120,000 businesses.
Bid and Rank. Under the Keyword Bid & Rank Program, a sponsor or member can choose where they appear on the results page of a selected "keyword". Research indicates that when someone conducts a search on the Internet, they seldom go further than the first page or two of results. Thus, it is important to a business where it appears on the results page on which it first appears. Many search engines rely on a "relevancy" process where they count the number of times a keyword might appear within the site. Accordingly, some website operators have taken to "imbedding" the keyword multiple times to appear more relevant.
With the Keyword Bid & Rank program offered by Hitsgalore.com, the website operator can ensure their placement on the results page but pay only for those "click-throughs" that actually visit their site as a result of a search at Hitsgalore.com. The bidding process starts at $0.01 per click-through and each time someone is outbid, they receive email messages notifying them of that fact. Thus, the bidding becomes "real-time". Hitsgalore.com currently has bidders, or keyword sponsors, bidding as high as $35.00 per click-through on certain keywords. Each keyword sponsor can have an unlimited number of keywords and has the ability to bid on each. As of September 30, 1999, the Company has approximately 2,500 key word sponsors, or bidders.
Life Foundation Trust Sales Agreement. On April 15, 1999, the Company and the Life Foundation Trust ("LFT") entered into an agreement that provided for, among other things, the reservation by Hitsgalore.com of up to 200 metropolitan areas for the Company's "Local City Editions (LCEs)." LCEs are websites that are developed by the Company for cities within a specified area. These websites contain local city content and search capabilities on a local basis,
The total purchase price for the LCEs reserved by Hitsgalore.com under the agreement is $I0 million. The websites axe to be developed by Hitsgalore.com over the twelve-month period ending on April 15, 2000 and the payment from LFT to Hitsgalore.com is to be made on that date. As of June 30, 1999, the Company had developed approximately 228 websites in approximately 58 metropolitan areas under this agreement.
Through the LCEs, Hitsgalore.com is able to localize search results. Thus, someone conducting a search at a local city edition can find those businesses offering a given product or service within that market. The LCEs also contain local content, such as articles and stories about the local market, as well as pertinent/inks to other local city information such as weather, sports and other media channels. The Company anticipates deriving revenues, over and above the amount of the sales agreement with LFT, by marketing its sponsorship and bid and rank programs to local members (see "Core Product Business Model").
Future Portal Service Opportunities
The Company is aggressive in its pursuit of quality portal services and has been successful in attracting partnerships with some of the most respected names in the world on or offline. One partnership recently announced is with Nightingale-Conant, the world's oldest and largest motivational seller of books and tapes. Nightingale has renowned authors such as Zig Ziggler, Earl Nightingale, Anthony Robbins and over 100 other well-know authors. Hitsgalore.com will offer a portal service that will let members hear a 2-5 minute motivational clip. A Hitsgalore.com sponsor, of course, will also pay for these clips.
Private Equity/IPO Website Joint Venture
Hitsgalore.com is initiating a new portal site aimed at the IPO and investment community. Since many fledgling internet companies need to raise large sums of capital to compete, they must engage fund raising resources to help in bringing their companies to the attention of lenders and others who might have an interest in there firm. Tile "Hitsgalore Investment and Financing Show" will provide a low cost, high exposure platform for those raising capital. This kind of informative content has a very sizeable audience.
The show will be broadcast live via streaming video on the internet. Shows will be produced in Hitsgalore.com's Irvine studios. Hitsgalore.com has the know how and understanding of internet broadcasting to produce top quality programs consistently. Hitsgalore's joint venture partner, the Amrhein Foley Group, will provide a steady stream of businesses wishing to acquire funds and willing to pay the associated fees.
Management
Dorian Reed is the Company's Chairman of the Board and Chief Technology Officer. Mr. Reed is the creator of the Hitsgalore.com concept. He has been in sales, marketing and consulting of technology services for more than 20 years. He has extensive knowledge of internet technologies and is skilled in HTML, CGI, Java, Shockwave, Cold Fusion, Audio/Video mad other internet technologies.
As a holder of copyrights and patents in the field of electronics and communications, he has created products and traveled the world producing and selling them. In the course of these activities, he has worked with GM, Ford, Chrysler, Bendix and many other Fortune 500 companies.
Steve Bradford, a founding stockholder of Hitsgalore.com along with Mr. Reed, is the Company's Chief Executive Officer and a Director. For the past 5 years, Mr. Bradford's business activities have been focused primarily on developing business strategies and investment opportunities for telecommunications and internet companies. Mr. Bradford previously served as Chief Operations Officer of OUP, Inc., a closely held direct mail company in Kansas City with annual sales in excess of $10 million. Mr. Bradford was also a director and President of Wamego Real Estate Development Co., Inc., a Missouri corporation. Mr. Bradford holds a BS degree in Business Administration and a JD from the University of Kansas.
Robert A. Thompson, who recently joined Hitsgalore.com as Chief Financial Officer and Vice President, has been a consultant to the Company for accounting and financial reporting matters since March 1999. Mr. Thompson was the Chief Financial Officer of Systems Communications, Inc. from 1996 through 1998 and prior to that position, he served as Vice President of Anchor Glass Container Corp., a Fortune 500 company, for the period 1991- 1996. Mr. Thompson has twelve years of accounting and audit experience with two "Big 5" international public accounting firms.
Capitalization
The capitalization of the Company as of June 30, 1999 is summarized as follows:
Class A convertible preferred stock, stated value and liquidation preference $1.00 per share; authorized 5,000,000 shares, issued and outstanding 500,000 500,000 shares (35,714 common equivalent shares) -- $55,000
Class B convertible preferred stock, stated value and liquidation preference $1.00 per share; authorized 10,000,000 shares, issued and outstanding 100,000 shares (5,195 common equivalent shares) -- 54,764
Common stock, $0.001 par value; authorized 50,000,000 shares, issued and outstanding 49,203,160 shares -- 49,203
Common stock, $0.001 par value, 2,267,858 shares to be issued -- 507,700
Additional paid in capital -- 11,306,716
Stock subscription receivable -- (10,000,000)
Accumulated deficit, including merger liabilities assumed of $689,027 -- (462,765)
Total stockholders' equity -- $ 1,510,618
Market for Common Equity
The common stock of Hitsgalore.com is traded on the OTC bulletin board under the ticker symbol HITT. The Company's per share stock price has ranged from a high of $20.3125 to a low of $1.0625 during the period from March 19, 1999 to October 20, 1999. As of October 20, 1999, the quoted market value of Hitsgalore.com common stock approximately $1.50 per share.
Beneficial Ownership
The following table sets forth certain information regarding beneficial ownership of the Company's common stock as of June 30, 1999 by each stockholder known by the Company to be a beneficial owner of more than 5 percent of the Company's common stock mad by each of the directors and executive officers of the Company. Except as indicated, the Company believes that the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.
Name of Beneficial Owner ----- Number of Shares ----- Percent
Dorian Reed ----- 28,150,000 (1) ----- 56.7%
Steve Bradford ----- 6,100,000 (2) ----- 11.9%
All officers and directors as a group ----- 34,280,000 (3) ----- 66.6%
(1) Includes 2,000,000 shares owned by Audrey M. Reed, spouse of Mr. Reed.
(2) Includes 2,250,000 and 1,850,000 shares, respectively, owned by Rose Grace Faith Holdings, LLC and Diana R. Bradford, spouse of Mr. Bradford. Rose Grace Faith Holdings, LLC is owned by Mr. Bradford and his minor children.
(3) Includes the shares referred to in (1) and (2) and 10,000 shares awarded to each of Messrs. Price, Kaich and Grant for serving on the Company's Board of Directors.
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