SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ____________
Commission File No. 000-27233
---------
RRUN VENTURES NETWORK, INC.
---------------------------
(Exact name of Registrant as specified in its charter)
NEVADA 98-0204736
---------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
62 W. 8th Avenue, 4th Floor
Vancouver, British Columbia, Canada V5Y 1M7
-------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number,
including area code: (604) 682-6541
---------------
Check whether the issuer
(1) filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes ( X ) No ( ).
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the last practicable date.
Class Outstanding as of June 30, 2002
----- ------------------------------------
$0.0001 par value Common Stock 17,854,724
Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]
1
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited financial statements have been prepared in accordance
with the instructions to Form 10-QSB and Item 310 (b) of Regulation S-B, and,
therefore, do not include all information and footnotes necessary for a complete
presentation of financial position, results of operations, cash flows, and
stockholders' equity in conformity with generally accepted accounting
principles. In the opinion of management, all adjustments considered necessary
for a fair presentation of the results of operations and financial position have
been included and all such adjustments are of a normal recurring nature.
Operating results for the six months ended June 30, 2002 are not necessarily
indicative of the results that can be expected for the year ending December 31,
2002.
2
RRUN VENTURES NETWORK INC.
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002
(Unaudited)
(Stated in U.S. Dollars)
RRUN VENTURES NETWORK INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
(Unaudited)
(Stated in U.S. Dollars)
-----------------------------------------------------------------
JUNE 30 DECEMBER 31
2002 2001
-----------------------------------------------------------------
ASSETS
Current
Cash $ 85 $ 1,421
Goods and Services
Tax recoverable 2,613 5,014
Accounts receivable 25,000 -
Prepaid expense 11,955 342
Notes receivable 68,250 -
----------------------------
107,903 6,777
Capital Assets 31,555 36,929
Investments 6,750 6,750
----------------------------
$ 146,208 $ 50,456
=================================================================
LIABILITIES
Current
Accounts payable $ 1,919,189 $ 1,113,855
Loans and advances payable 590,470 518,998
----------------------------
2,509,659 1,632,853
----------------------------
STOCKHOLDERS' DEFICIENCY
Share Capital
Authorized:
100,000,000 common shares,
par value $0.0001 per share
Issued and outstanding:
17,854,724 common shares
at June 30, 2002 and
14,614,724 common shares
at December 31, 2001 1,786 1,462
Add: Share subscriptions received:
381,250 common shares
at June 30, 2002 and
50,000 common shares
at December 31, 2001 33,400 10,000
Additional paid-in capital 561,420 109,744
Deficit (2,960,057) (1,703,603)
----------------------------
(2,363,451) (1,582,397)
----------------------------
$ 146,208 $ 50,456
=================================================================
RRUN VENTURES NETWORK INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
(Unaudited)
(Stated in U.S. Dollars)
THREE SIX THREE SIX INCEPTION
MONTHS MONTHS MONTHS MONTHS OCTOBER 12
ENDED ENDED ENDED ENDED 2000 TO
JUNE 30 JUNE 30 JUNE 30 JUNE 30 JUNE 30
2002 2002 2001 2001 2002
-------------------------------------------------------------
Revenue $ 30,000 $ 55,000 $ - $ - $ 59,000
-------------------------------------------------------------
Expenses
Administrative
services 38 6,139 25,873 69,644 96,022
Amortization 2,685 5,372 243 469 11,800
Business development 169,106 360,272 - - 576,680
Consulting 68,401 328,402 146,508 414,032 375,961
Equipment leases 7,444 14,918 - - 29,839
Investor relations 104,178 275,952 - - 402,099
Marketing - 540 - - 35,902
Media design 6,071 22,055 - - 82,177
Office, rent
and sundry 73,560 124,532 9,355 24,389 233,429
Professional fees 32,461 58,066 6,026 10,501 192,578
Software development 33,222 72,110 - - 850,368
Travel 15,589 25,239 6,069 12,723 93,870
Wages and benefits 4,513 17,857 - - 26,196
-------------------------------------------------------------
517,268 1,311,454 194,074 531,758 3,006,921
-------------------------------------------------------------
Loss Before The
Following 487,268 1,256,454 194,074 531,758 2,947,921
Minority Interest
In Loss
Of Subsidiary - - - - (219)
-------------------------------------------------------------
Net Loss For
The Period $ 487,268 $ 1,256,454 $ 194,074 $ 531,758 $2,947,702
================================================================================
Net Loss Per
Share $ 0.03 $ 0.08 $ 0.03 $ 0.09
====================================================================
Weighted Average
Number Of
Common Shares
Outstanding 17,165,054 15,979,807 6,108,780 6,108,780
====================================================================
RRUN VENTURES NETWORK INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Stated in U.S. Dollars)
-------------------------------------------------------------
THREE SIX THREE SIX INCEPTION
MONTHS MONTHS MONTHS MONTHS OCTOBER 12
ENDED ENDED ENDED ENDED 2000 TO
JUNE 30 JUNE 30 JUNE 30 JUNE 30 JUNE 30
2002 2002 2001 2001 2002
-------------------------------------------------------------
Cash Flows From
Operating Activities
Net loss for
the period $(487,268) $(1,256,454) $(194,074) $(531,758) $(2,947,702)
Adjustments To
Reconcile
Net Loss To
Net Cash Used
By Operating
Activities
Amortization 2,685 5,372 243 469 11,800
Issue of
common stock
for expenses - 60,000 - - 68,200
Minority interest
in loss of
subsidiary - - - - (219)
Goods and
Services Tax
recoverable (943) 2,401 - - (2,614)
Accounts
receivable (25,000) (25,000) - - (25,000)
Prepaid expense 2,134 (11,613) - 500 11,955
Accounts payable 240,776 855,336 90,072 308,804 1,869,478
Loans and
advances payable 37,558 71,472 109,041 226,180 631,808
-------------------------------------------------------------
(230,058) (298,486) 5,282 4,195 (382,294)
-------------------------------------------------------------
Cash Flows
From Investing
Activities
Net asset deficiency
of legal
parent at
date of
reverse take
-over transaction - - - - (12,355)
Purchase of
capital assets - - (236) (6,258) (43,357)
-------------------------------------------------------------
- - (236) (6,258) (55,712)
-------------------------------------------------------------
Cash Flows From
Financing Activities
Shares issued
for cash 273,750 273,750 - - 287,150
Share
subscriptions
received (75,600) 23,400 - - 33,400
-------------------------------------------------------------
198,150 297,150 - - 320,550
-------------------------------------------------------------
Increase (Decrease)
In Cash (31,908) (1,336) 5,046 (2,063) (117,456)
Cash Acquired
On Acquisition
Of Subsidiary - - - - 117,541
Cash, Beginning
Of Period 31,993 1,421 3,685 10,794 -
-------------------------------------------------------------
Cash, End
Of Period $ 85 $ 85 $ 8,731 $ 8,731 $ 85
================================================================================
RRUN VENTURES NETWORK INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
JUNE 30, 2002
(Unaudited)
(Stated in U.S. Dollars)
ADDITIONAL
PAID-IN
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------------------------------------------------------------
Shares issued for
cash and services 4,200,000 $ 4,200 $ - $ - $ 4,200
Adjustment to
number of
shares issued
and outstanding
as a result of
the acquisition
of RAHX, Inc.
RAHX, Inc. (4,200,000) (4,200) - - (4,200)
RRUN Ventures Inc. 5,708,780 5,709 (1,509) - 4,200
Adjustment to
stated value of
stockholders' equity
to reflect minority
interest in the
net assets of RAHX,
Inc. at the
acquisition date - - (219) - (219)
Net asset deficiency
of legal parent
at date of
reverse take-
over transaction - - - (12,355) (12,355)
Shares issued to
acquire investment
in Kaph Data
Engineering Inc. 400,000 400 6,350 - 6,750
Loss for the period - - - (79,249) (79,249)
------------------------------------------------------------
Balance,
December 31, 2000 6,108,780 6,109 4,622 (91,604) (80,873)
Adjustment to
number of shares
issued and
outstanding as
a result of the
acquisition of
RRUN Ventures, Inc.
RRUN Ventures,
Inc. (6,108,780) (6,109) (4,622) - (10,731)
RRUN Ventures
Network Inc. 288,420 288 10,443 - 10,731
Fair value of shares
issued in connection
with the acquisition
of RRUN Ventures,
Inc. 305,439 306 28,325 - 28,631
------------------------------------------------------------
593,859 594 38,768 (91,604) (52,242)
Increase in issued
shares due to
20 for 1 stock
split 11,283,321 594 (594) - -
Shares issued
for debt 1,867,544 187 54,257 - 54,444
Shares issued
for cash 670,000 67 13,333 - 13,400
Shares issued for
services 200,000 20 3,980 - 4,000
Loss for the year - - - (1,611,999) (1,611,999)
------------------------------------------------------------
Balance, December
31, 2001 14,614,724 1,462 109,744 (1,703,603) (1,592,397)
Shares issued
for debt 500,000 50 49,950 - 50,000
Shares issued
for services 500,000 50 59,950 - 60,000
Shares issued for
cash and notes
receivable 2,240,000 224 341,776 - 342,000
Loss for the period - - - (1,256,454) (1,256,454)
------------------------------------------------------------
Balance, June
30, 2002 17,854,724 $ 1,786 $561,420 $(2,960,057) $(2,396,851)
============================================================
RRUN VENTURES NETWORK INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002
(Unaudited)
(Stated in U.S. Dollars)
1. BASIS OF PRESENTATION
The unaudited consolidated financial statements as of June 30, 2002 included
herein have been prepared without audit pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with United States generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. It is suggested that
these consolidated financial statements be read in conjunction with the December
31, 2001 audited consolidated financial statements and notes thereto.
2. NATURE OF OPERATIONS
a) Organization
The Company was incorporated in the State of Nevada, U.S.A., on October 12,
2000.
b) Development Stage Activities
The Company was organized as a holding company to develop or acquire innovative
ventures with an emphasis on serving the lifestyle needs of the 18 - 34 year
Digital Generation through the production and marketing of lifestyle products
and services. The Company's initial venture is RAHX, a business concept focused
on delivering, for its customers, a consolidated Entertainment Experience
Network comprised of many services ranging from digital media peer to peer file
exchange to live entertainment and online video games. The Company's other
venture is AXXUS, an enhanced e-commerce and communication backbone technology.
RRUN VENTURES NETWORK INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002
(Unaudited)
(Stated in U.S. Dollars)
2. NATURE OF OPERATIONS (Continued)
c) Going Concern
Since inception, the Company has suffered recurring losses, net cash outflows
from operations and, at June 30, 2002, has a working capital deficiency of
$2,401,756. The Company expects to continue to incur substantial losses to
complete the development and testing of its technology. Since its inception,
the Company has funded operations through common stock issuances and related
party loans in order to meet its strategic objectives. Management believes that
sufficient funding will be available to meet its business objectives, including
anticipated cash needs for working capital, and is currently evaluating several
financing options. However, there can be no assurance that the Company will be
able to obtain sufficient funds to continue the development of and, if
successful, to commence the sale of its products under development. As a result
of the foregoing, there exists substantial doubt about the Company's ability to
continue as a going concern. These consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
3. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in the United States.
Because a precise determination of many assets and liabilities is dependent upon
future events, the preparation of consolidated financial statements for a period
necessarily involves the use of estimates which have been made using careful
judgement.
The consolidated financial statements have, in management's opinion, been
properly prepared within reasonable limits of materiality and within the
framework of the significant accounting policies summarized below:
a) Consolidation
These consolidated financial statements include the accounts of the Company, its
100% owned subsidiaries, RRUN Labs Inc. and AXXUS Corporation, and its 67% owned
subsidiary, RAHX, Inc.
RRUN VENTURES NETWORK INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002
(Unaudited)
(Stated in U.S. Dollars)
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
b) Development Stage Company
The Company is a development stage company as defined in the Statements of
Financial Accounting Standards No. 7. The Company is devoting substantially all
of its present efforts to establish a new business and none of its planned
principal operations have commenced. All losses accumulated since inception
have been considered as part of the Company's development stage activities.
c) Investments
Investments in companies owned less than 20% are recorded at the lower of cost
or fair market value.
d) Software Development Costs
The costs to develop new software products and enhancements to existing software
products will be expensed as incurred until technological feasibility has been
established. Once technological feasibility has been established, any
additional costs will be capitalized.
e) Income Taxes
The Company has adopted Statement of Financial Accounting Standards No. 109 -
"Accounting for Income Taxes" (SFAS 109). This standard requires the use of an
asset and liability approach for financial accounting and reporting on income
taxes. If it is more likely than not that some portion or all if a deferred tax
asset will not be realized, a valuation allowance is recognized.
f) Amortization
Capital assets are being amortized on the declining balance basis at the
following rates:
Computer equipment 30%
===
Computer software 100%
Office furniture and equipment 20%
RRUN VENTURES NETWORK INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002
(Unaudited)
(Stated in U.S. Dollars)
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
g) Stock Based Compensation
The Company accounts for stock based employee compensation arrangements in
accordance with the provisions of Accounting Principles Board Opinion No. 25 -
"Accounting for Stock Issued to Employees" (APB No. 25) and complies with the
disclosure provisions of Statement of Financial Accounting Standards No. 123 -
"Accounting for Stock Based Compensation" (SFAS No. 123). Under APB No. 25,
compensation expense is recognized based on the difference, if any, on the date
of grant between the estimated fair value of the Company's stock and the amount
an employee must pay to acquire the stock. Compensation expense is recognized
immediately for past services and rateably for future services over the option
vesting period.
h) Financial Instruments
The Company's financial instruments consist of cash, GST recoverable, prepaid
expenses and accounts payable.
Unless otherwise noted, it is management's opinion that this Company is not
exposed to significant interest or credit risks arising from these financial
instruments. The fair value of these financial instruments approximate their
carrying values, unless otherwise noted.
i) Net Loss Per Share
Net loss per share is calculated using the weighted average number of common
shares outstanding during the period. Fully diluted loss per share is not
presented as the impact of the exercise of options is anti-dilutive.
Item 2. Management's Discussion and Analysis or Plan of Operations
RESULTS OF OPERATIONS
Calendar Year Ended December 31, 2000
For the year ended December 31, 2000, we earned no revenues. During the year we
incurred expenses of $79,468. The expenses incurred were predominantly
administrative, consulting and professional fees relating primarily to the
merger of RRUN Ventures Inc. with United Management Inc. Since we had no
revenues, we incurred a net loss from operations of $79,249 for the fiscal year
after a Minority Interest In Loss of Subsidiary of $219.
Calendar Year Ended December 31, 2001
For the year ended December 31, 2001, we earned revenues of $4000. These one
time revenues were from Digital Design Interactive services provided by one of
our internal support units. These revenues will not be recurring as that
internal support unit is not a revenue producing unit. During the year we
incurred expenses of $1,615,999. Of theses expenses, $778, 258 were software
development costs. We incurred a net loss from operations of $1,611,999 for the
fiscal year.
Calendar Quarter Ended March 31, 2002
For the quarter ended March 31, 2002, we earned revenues of $25,000. The
revenues were related to the licensing of rights for the use of our AXXUS
technology. The licensing agreement was executed during the quarter and
additional revenue will be earned from that agreement.
During the quarter, we incurred expenses of $794,186. These operating expenses
included $38, 888 in software development, $260,001 in consulting fees and
$191,166 in business development costs.
We incurred a net loss from operations of $769,186 for the fiscal quarter ended
March 31, 2002.
Calendar Quarter Ended June 30, 2002
For the quarter ended June 30, 2002, we earned revenues of $30,000. The revenues
were related to the licensing of rights for the use of our AXXUS technology.
During the quarter, we incurred expenses of $487,268. These operating expenses
included $33,222 in software development, $68,401 in consulting fees and
$169,106 in business development costs.
3
We incurred a net loss from operations of $487,268 for the fiscal quarter ended
June 30, 2002.
Liquidity and Financial Condition
We had cash-on hand of totaling $85 as of June 30, 2002.
Due to major changes in market conditions, management of the company has decided
to change its strategy to maximize its chances of success. The existing strategy
has been to build urban lifestyle-based businesses based around software and
on-line communities. We believe that our vision to build lifestyle businesses is
still sound but that we need to change to an off-line focus with the on-line
focus coming later. Accordingly we are focusing our immediate efforts on
building a chain of urban music nightclubs as the base for our urban lifestyle
businesses. These nightclubs will still use our software in order to become the
center of on-line communities and we will still be using a branding approach so
that we can sell other urban lifestyle products and services.
Our immediate aim is to acquire the first nightclub so that we can use it as a
flagship for the chain and demonstrate our unique and proprietary entertainment
concepts for use in our other clubs. We intend that the later clubs will be
developed in new and existing locations in major cities throughout the US and
Canada.
In order to finance the first acquisition we plan to raise capital through
different types of offerings. We plan to fund new nightclub locations, including
the first acquisition, through direct investments into the individual nightclubs
and providing the investors with cash dividends and some stock in RRUN. This
will reduce the potential dilution to RRUN shareholders. We also plan to raise
capital by sale of stock in RAHX, our lifestyle subsidiary, which again will
reduce dilution to RRUN shareholders. We also plan to invite direct investment
into RRUN to provide funds for general corporate purposes. We believe that this
plan will enable us to achieve our development goals with acceptable dilution to
RRUN stockholders.
The Company believes that the first acquisition of a nightclub will require
approximately a minimum of $500,000 for the acquisition plus approximately
$100,000 in legal, accounting and administrative expenses. In addition it will
require another $400,000 minimum for ongoing corporate purposes. This is a
minimum total of approximately $1 million that will be required in the next
quarter when it is planning to make the first acquisition. In the final quarter
of this year it plans to make another acquisition. It believes that the cost of
this acquisition will be approximately a minimum of $1.5 million and that
another approximately $500,000 minimum will be required for the same purposes as
listed above for the first acquisition and for ongoing corporate purposes. Thus
the Company
4
anticipates a minimum capital requirement of approximately $3 million by the end
of the 2002 calendar year.
After the first two acquisitions the Company intends to develop other nightclubs
from scratch rather than making acquisitions. It has a plan to open 6 additional
nightclubs by the end of 2003 and anticipates that additional funding will be
required to effect this. The company hopes this necessary funding will be less
than the overall cost of opening these clubs, since the revenues from the first
two clubs is hoped to generate enough cash flow to reduce the level of capital
required. The Company has developed comprehensive business and financial plans
that show that it can develop its chain of nightclubs on a cash positive basis
and without incurring substantial dilution to stockholders such that the Company
can increase its overall valuation substantially.
We are planning to secure the financing to satisfy the capital needs for each
phase through the execution of various funding methods, primarily private
placement investments. We plan to achieve this by securing relationships with
investment bankers, and other private equity companies, that have the experience
and relationships to aid the Company with its capital raising efforts. We have
already commenced discussions with such companies.
Although the Company has capital raising strategies that are designed to
minimize dilution to current shareholders, the Company may not be able to avoid
significant dilution due to many factors, including but not limited to, the
closing of financing at lower than the desired market price of the Company's
common stock.
If the funding is unavailable, in whole or in part, at the expected time, we
will delay implementation of entire components of certain aspects of the
implementation plan until the necessary funding is secured. There cannot be any
assurance that we will raise sufficient capital to meet the business plan. In
addition to delays to the implementation plan, if sufficient capital is not
raised, we may suffer consequences including but not limited to the following;
we may have to suspend or discontinue operations of one or more of our business
units, such as RAHX; or we may have to suspend or discontinue operations of RRUN
itself.
FORWARD LOOKING STATEMENTS
This report on Form 10-QSB contains certain forward-looking statements within
the meaning of section 21(e) of the Securities Exchange Act of 1934, as amended,
and other applicable securities laws. All statements other than statements of
historical fact are "forward-looking statements" for purposes of these
provisions, including any projections of earnings, revenues, or other
5
financial items; any statements of the plans, strategies, and objectives of
management for future operation; any statements concerning proposed new
products, services, or developments, any statements regarding future economic
conditions or performance, statements of belief, and any statement of
assumptions underlying any of the foregoing. Such forward-looking statements are
subject to inherent risks and uncertainties, and actual results could differ
materially from those anticipated by the forward-looking statements.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In April 2002, the Company received notice that Luke Kolesar filed a lawsuit
against the Company in Lynchburg General District Court for the Commonwealth of
Virginia. The action concerned an alleged claim for unpaid wages of an employee
of RRUN Labs, Inc., a subsidiary of RRUN Ventures Network, Inc. The amount of
the lawsuit is $6,853.85, not including interest accruing from October 30, 2001
at 9% plus court costs of $56.
On July 30, 2002, Micro Concept Systems Inc. ("Plaintiff") filed suit in the
Supreme Court of British Columbia against the Company. The suit alleges non
payment of $30,143 for computer equipment sold to the Company by the Plaintiff.
The Plaintiff obtained a Garnishing Order Before Judgment pursuant to which it
has garnished the Company's account $1,884.
The Company believes that, as it commences revenue-producing operations and as
it raises capital, it will have the resources to settle the abovementioned cases
and it has every intention of doing so. The Company is working to reduce or
prevent situations with creditors or others that may result in litigation
against the Company. Its remedies may include settlements in cash and/or in
stock. Settlements in stock may result in unforeseen dilution to current
shareholders.
Item 2. Changes in Securities
Recent Sales of Unregistered Securities
-------------------------------------------
During the quarter ended June 30, 2002, we granted options for the purchase of
535,000 common shares of the Company. The exercise price of 35,000 of the
options was $0.25 per share. The exercise price of 500,000 of the options was
$0.30 per share. The options were granted to four consultants of the Company as
incentive stock options to encourage their focus on the business progress of the
Company. The transactions were isolated transactions with persons having a
close affiliation with the Company and were exempt from registration under the
Securities Act of 1933 pursuant to Section 4(2) of the Act because of not being
6
part of a public offering. The offering was for a limited purpose and did not
use the machinery of public distribution.
During the quarter ended June 30, 2002, we issued 1,560,000 common shares upon
the exercise of options for those shares. 500,000 of the shares were issued for
the exercise price of $0.30 per share. 700,000 of the shares were issued for
the exercise price of $0.20 per share. 360,000 of the shares were issued for the
exercise price of $0.10 per share for the aggregate exercise price for all
shares of $326,000. The shares were issued to seven consultants of the Company.
The transactions were isolated transactions with persons having a close
affiliation with the Company and were exempt from registration under the
Securities Act of 1933 pursuant to Section 4(2) of the Act because of not being
part of a public offering. The offering was for a limited purpose and did not
use the machinery of public distribution. Some of the options described in this
paragraph were exercised pursuant to a so called cashless exercise whereby the
Company loaned the option holder the money to exercise the option. Due to a
depressed market for the shares described in this paragraph following the
exercise of the options, the Company discounted, during the quarter, notes held
by the Company for the purchase of such shares in the total amount of $125,000.
In May, 2002, the Company sold a total of 340,000 common shares to two
individuals at a price of $0.06 per share for total consideration of $20,400.
The transactions were isolated transactions with persons having a close
affiliation with the Company and were exempt from registration under the
Securities Act of 1933 pursuant to Section 4(2) of the Act because of not being
part of a public offering. The offering was for a limited purpose and did not
use the machinery of public distribution.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
----------
99.1 Risk Factors
7
(b) Reports on Form 8-K
----------------------
None
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorised.
RRUN Ventures Network, Inc.
Date: August 19, 2002
By: /s/ Ray Hawkins
-------------------------------
Ray Hawkins, Chairman, Co-CEO
By: /s/ Edwin Kwong
-----------------------------------------
Edwin Kwong, Principal Accounting Officer
8
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Ray Hawkins, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on
Form 10-QSB of RRUN VENTURES NETWORK, INC. for the quarterly period ended June
30, 2002 fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and that the information contained in the
Quarterly Report on Form 10-QSB fairly presents in all material respects the
financial condition and results of operations of RRUN VENTURES NETWORK, INC.
By: /s/ Ray Hawkins
----------------
Name: Ray Hawkins
Title: Co-Chief Executive Officer
Date: August 19, 2002
I, Edwin Kwong, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on
Form 10-QSB of RRUN VENTURES NETWORK, INC. for the quarterly period ended June
30, 2002 fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and that the information contained in the
Quarterly Report on Form 10-QSB fairly presents in all material respects the
financial condition and results of operations of RRUN VENTURES NETWORK, INC.
By: /s/ Edwin Kwong
--------------------------
Name: Edwin Kwong
Title: Chief Financial Officer
Date: August 19, 2002
9