THE BUSINESS OF THE COMPANY



[pic]

NetOffer, Inc.

(A Texas corporation)

Spring 2006 Interim Financing

Private Placement Memorandum

February 5, 2006

1738 N. Greenville Ave.

Richardson, TX 75081

Phone: 972-470-5888

Fax: 972-470-5814

|Offering Summary: |

|Maximum of 500,000 Shares Common Stock at a price of $0.06 per Share |

|No Minimum Shares Sold required to accept funds invested. |

|Minimum Investment Amount: $600 |

|Minimum Incremental Additional Investment: $600 |

|Maximum Capital Raised if all Shares Subscribed: $30,000 |

|If Fully Subscribed the Total Shares Outstanding after this Offering will be 8,139,840 Shares |

|Post-Offering Valuation of the Company will be $488,390 based on Full Subscription |

TABLE OF CONTENTS

THE BUSINESS OF THE COMPANY 3

Phase One: Discount Real Estate Services 3

Flat Fee MLS Listing Services 3

Buyer’s “Commission Rebate” Program 5

Phase Two: Technology Licensing 6

Phase Three: Sub-Licensing of Technology in Local Markets 6

Marketing STRATEGY 8

CLIENTS 10

Flat Fee MLS Listing Service 10

Advertising Services – Vendor Database Search Engine Listings 10

Affiliates – Technology Licensing in Major Markets 10

Hosted Accounts – Brokers and Agents within an Affiliate’s Market Area 11

MARKET POTENTIAL 11

Potential for Flat Fee Listings in the Dallas Fort Worth Area 11

Potential Affiliates for Technology Licensing 11

Potential Hosted Accounts in the DFW area 12

Competition 13

Competitive Strategy 14

Build a Barrier to Entry 14

Increase Value of Website 14

Low Cost Efficient Operations 14

Establish Market Dominance in DFW Market 15

Expand to other states during 2006 and 2007 15

Expand Local Realtor Network during 2006 and 2007 15

Risk Factors 16

DESCRIPTION OF SECURITIES AND THE OFFERING PRICE 19

USE OF PROCEEDS 20

OFFICERS AND DIRECTORS 21

Officers of the Company 21

Directors of the Company 22

EXECUTIVE COMPENSATION 22

CASH FLOW PROJECTON ASSUMPTIONS 23

Discussion 23

Detailed Explanation 23

2005 FINANCIAL STATEMENTS 25

Balance Sheet (attached) 25

Income Statement (attached) 25

SUBSCRIPTION DOCUMENTS 26

Subscription Agreement (attached) 26

Shareholder Agreement (attached) 26

THE BUSINESS OF THE COMPANY

NetOffer is a Real Estate Brokerage that provides discount real estate MLS services, and traditionally priced real estate brokerage services, to the general public. The discount real estate services will be based on Flat Fee MLS Listings and on Buyer’s Rebate programs. During 2005 NetOffer listed approximately 700 homes on the MLS. To manage this high volume of listing activity NetOffer has created a very advanced web based interactive database technology that allows NetOffer to manage the flow of information between our clients and the MLS system with the maximum level of efficiency. Establishing a dominant position as the premier (best recognized) brand for Flat Fee MLS Listing Services in the DFW market has been the main goal of “Phase One” of the growth of the company. This goal has been accomplished and will be further solidified during 2006.

NetOffer licenses this advanced web based interactive database technology to other brokers and agents who want to have access to technologies that can give them a competitive advantage in the market. The licensing of this advanced technology to a national network of Affiliates is “Phase Two” of the growth of the company. During the remainder of 2006 and during 2006 this phase of the growth of the company will be a primary focus of management.

The future growth of NetOffer will encompass expanding the ‘penetration’ of the local market by NetOffer and its Affiliates through providing ‘sub-licensing’ of our advanced technology to local Brokers and Agents. This third phase of our growth will be researched and developed during 2006 and will be expanded during 2007 and beyond.

Phase One: Discount Real Estate Services

Flat Fee MLS Listing Services

 

Over the last 30-40 years the National Association of REALTORS (“NAR”), and local associations of REALTORS, have effectively positioned the Multiple Listing Service (“MLS”) system as the single most efficient means of marketing residential property ever conceived of. With the advent of the Internet in the late 1990s, the MLS evolved from a printed book format to an electronic format with the information contained in the MLS available on the Internet for public consumption through the websites of the various member organizations, mostly local Broker offices.

 

The information displayed through these member Broker websites is a limited subset of the full MLS information, however, it is sufficient for the public to use as a primary research tool during their search for a new residence. Typically, the homebuyer will search for potentially suitable properties on the Internet then contact a local agent that can show the homes that the buyer finds of interest. This has dramatically changed the nature of the home selling process, but, there is a disconnect between reality and market practices.

 

Surveys by the NAR indicate that between 80% and 95% of buyers routinely use the Internet to perform searches for a new residence, depending on the community surveyed. The very success of the MLS and the Internet has changed the dynamics of selling residential property. It is no longer necessary for the Listing Agent to do much other than list the residence on the MLS to effectively market the property.

 

Because the majority of buyers routinely use the Internet to search the MLS it is no longer necessary to do much other than list the residence on the MLS to reach in excess of 85% of potential buyers for the average property. Placing advertisements in the local newspaper classified section for real estate sales will increase the coverage of potential buyers to near 100%. While most Listing Agents will, for the standard 6% commission, handle the placement and cost of newspaper classified advertising, savvy home owners have come to realize that they can easily manage the advertising of their own homes and that the benefit of having a traditional real estate agency relationship at a cost of 3% is no longer justified.

 

Real estate agents and brokers have been very resistant to adjusting their marketing strategy to the changing reality and have not been very forthcoming in offering reduced cost listing services. This presents an opportunity for low cost providers to step in and fill a niche that is rapidly expanding.

 

Providing listing services for a low cost can be done with a wide variety of pricing and service strategies. The majority of low cost listing agents attempt to charge between $495 and $1000 for their services, usually with some sort of overriding commission for the sale of the property when and if it sales. The challenge is that any real estate agent can provide low cost listing services. The essential challenge for a company trying to build a national branded company providing discount MLS listing services is how to effectively compete in a market where there are very few barriers to entry.

 

The solution is to build a brand based on market awareness and website traffic such that any competitor must address the issue of additional competitive advantage. Since a listing on the MLS is a commodity, and therefore essentially equivalent regardless of whom provides the service, the differentiation must come from some related value added benefit. The simplest value added benefit is to add to the MLS listing service the ability to increase the likelihood of connecting the seller to a buyer without the seller having to pay a commission. This can be done through an ancillary marketing website.

 

NetOffer has developed a website that is focused on marketing real estate directly to the buyer and connecting the buyer directly with the seller. By enhancing the market awareness of and building a critical mass threshold of traffic and brand awareness can effectively create a ‘market’ for residential real estate similar to the ‘market’ that has been built by eBay. Once this critical mass is achieved, it will become extremely difficult for other competitors to provide the same value that offers, even at a dramatically reduced price level.

 

The essential opportunity, therefore, is to create a marketing system that allows for the efficient provision of services to large masses of sellers and to establish brand awareness on a sufficient scale to restrict or prohibit the development of competitors in each market area where operates. Once a critical mass threshold is achieved, it will be possible for to increase rates to take advantage of the increase value offered by being the established, recognized marketplace for residential real estate.

 

As a recognized marketplace for residential real estate, there will be many offshoot opportunities for revenue generation, including but not limited to the following:

• Non-MLS FSBO property marketing on the website

• Rental property marketing – both apartment and individual

• Volume Listing (Builders, etc.) relationships

• Advertising revenues (title companies, mortgage companies, etc.)

Buyer’s “Commission Rebate” Program

Just as the changing marketplace has created an opportunity to provide Flat Fee MLS Listing Services in volume there is an opportunity to provide similar, volume based, discount services to Buyers. The ability to build a large scale, high volume business in this service category is predicated on having a high volume of traffic to the website so that the marketing message is presented to a large number of prospective Buyers.

Many Buyers use the Internet to research the market and perform much of the legwork that has been traditionally been done by Agents. With the proliferation of Internet based real estate listing services it is very common for Buyers to contact an Agent and have a very focused search due to their prior research on the Internet. In past years, the Agent was integral to the search process since the MLS was not available to the public via an efficient media such as the Internet.

When a Buyer can come to an Agent and utilize the Agent’s time efficiently and proceed directly to the presentation of an offer on a property without having to spend a lot of time viewing multiple potential properties the Agent can provide a discounted commission and still achieve a high return for time invested in the Buyer as their Client. A fee structure that fundamentally rewards the Buyer for not wasting the Agent’s time is a win-win for both the Buyer and the Agent. NetOffer will provide a fee structure based on the Buyer entering into a contract with the Agent that stipulates that they Buyer will pay the Agent an hourly rate for the Agent’s time, or, a commission of 1.5% of the Sale Price, whichever is greater. The contract will be structured to allow the Agent to be paid weekly if the Buyer does not proceed directly to a contract on a property.

While this concept is very revolutionary, it will be of high interest to many Buyers who have already performed much of the research that they need to find a suitable property. It will encourage Buyers to spend their time in advance of contacting NetOffer to obtain the services of a Buyers Representation Agent. I fact, there may be some instances of Buyers using the services of other Agents to preview homes, then contacting NetOffer to handle the contracting and closing.

Once NetOffer has established a high market visibility and brand presence with the Flat Fee MLS Listing Service, it should be very easy to leverage that visibility into a high volume Discount Commission Buyers Agent Service business. It should be relatively easy to attract Agents to handle this business since we can provide those Agents with a high guaranteed income and a volume business. The Discount Commission Buyers Agent compliments the Flat Fee MLS Listing Service business.

Phase Two: Technology Licensing

During 2005 NetOffer listed approximately 700 homes on the MLS in Texas. Listing properties involves handling a large amount of data, specific to each property, that must be accurately collected and transferred between the client and the MLS system. Additionally, changes to information, such as price and description, are required periodically on many listings and keeping track of these changes pose a daunting task.

NetOffer has developed and deployed a very sophisticated, second generation, interactive database technology that was designed from scratch based on experience with a first generation system that evolved from a business model that was not specific to real estate. This second generation system has been designed specifically with the needs of a high volume flat fee brokerage business model in mind and has become integral to the operation and the competitive position of NetOffer.

Due to the highly efficient level of information flow management that the system enables us to engage in NetOffer has begun a program of licensing the technology to Affiliates in other locations. As of January 31, 2006 NetOffer has a total of six (6) Affiliates. Each Affiliate Agreement is custom negotiated and the Affiliate licensing process has not yet achieved a level of standardization that would lend itself to ‘franchising’, however, as we learn more about what it takes to identify prospective Affiliates, along with how to help them become immediately successful, we may very well choose to broaden our program through a ‘franchise’ form of organization.

Features and Benefits to Affiliates

Phase Three: Sub-Licensing of Technology in Local Markets

During 2006 the Company will begin to expand the software capability to allow the Company to provide two new levels of industry client relationships. These are classified as Super Agents and Mini Brokers. Currently the NetOffer software allows the following ‘levels’ of access:

• Super Admin – highest level of access with complete control of the system.

• Broker – highest level of access with complete ‘operational’ control of system.

• Agent – allows control of Owner Listings and information but no control over Activation and Accounting functions.

• Owner – allows the Owner to add listings and manage limited information related to the listing of one or more property.

Within the next couple of weeks NetOffer will deploy a new technical service that we are calling Hosted Broker and Hosted Agent Accounts. These employ elements of traditional hosting services coupled with use of our advanced technology to manage client information. The general concept behind these Hosted Accounts is that the Broker/Agent client will use the Hosted Account as their primary website and will enjoy the benefits of the highly automated, sophisticated look and feel, of our website template and back office technology to increase their competitive advantage in the local market.

Hosted Accounts will allow full customization of the basic template with a very minimal ‘Powered by NetOffer’ moniker at the bottom of the pages. Otherwise, the template will be presented as if it were the Broker or Agent’s own website complete with domain name and email server. Hosted Accounts will require a nominal interaction with NetOffer to customize but will generally be very easy to customize.

Hosted Broker Accounts will have the ability to collect MLS Input Data directly from prospective clients (sellers) from the main page. Hosted Agent Accounts will not allow the client (seller) to input MLS Data directly into the system. Hosted Broker Accounts will allow Brokers/Agents to compete directly with NetOffer in offering Flat Fee MLS Listing services to the public in a fully automated fashion. Hosted Agent Accounts will permit the Agent to input the MLS Data for their client, but, the client will not be able to input the data. This difference between the two accounts will cause the Broker accounts to be more valuable due to the ability to shift the burden of data entry to the client.

Both types of accounts will have their listing data included in the NetOffer database. Inclusion in the NetOffer database is a significant advantage to the Broker or Agent since the NetOffer database has a high volume of internet searches and traffic and can help to find a buyer for the property listed there.

The Hosted Accounts should fill a needed niche in the market for Brokers and Agents that want inexpensive access to advanced technology. Additionally, NetOffer has many referral opportunities where we could send Buyer leads to Agents and Brokers when those leads are outside of the reasonable service area for those Agents who have their license directly with NetOffer. Referral commissions can be a significant source of ancillary income.

Marketing STRATEGY

Since any real estate agent can provide flat fee MLS listing services there is a very significant competitive threat from a multitude of individuals who could compete with NetOffer due to a low barrier to entry. As part of the general marketing strategy, it is important for NetOffer to establish a barrier to entry that makes it difficult or impossible for competitors to compete.

It will be the goal of NetOffer to emulate the eBay marketing model as a barrier to entry.

eBay has become the only significant provider of general consumer online auction services and enjoys a Net Income Margin that is the envy of U.S. businesses. This has been accomplished primarily because eBay has established a unique marketplace where buyers and sellers come together and create a synergy that is not possible to duplicate. Anyone wanting to sell a product will naturally want to sell in a marketplace that commands the highest number of prospective buyers for that product. Even if an alternative marketplace offers services for free, while eBay offers services as a high fee, the Sellers will want to market their products on eBay since the savings in eBay fees will be more than offset by the increased prices generated due to the high density of buyers willing to bid the price of their product to the highest market value.

NetOffer will strive to establish a similar market leadership position sufficient to restrict competition and enhance the value of the NetOffer service to clients.

During 2005 NetOffer executed a coordinated campaign of Internet, newspaper and radio advertising that quickly elevated consumer awareness of the Flat Fee services offered by NetOffer. As a direct result of that marketing campaign NetOffer is now enjoying a significant level of referrals and has dramatically reduced the reliance on marketing to drive traffic to our website.

The following marketing channels are presented in order of importance and the priority of usage during 2006:

Yard Signs

Yard Signs are extremely effective marketing tools that serve to both promote the services of NetOffer to other Sellers, but, also attracts Buyers to the website there they can learn about the Buyers Representation Services that are offered. The Company provides free Yard Signs to all Clients that purchase a 3 month or longer listing. Even though we will not be charging for these signs the value to NetOffer of having the advertising and brand building impact of those Yard Signs is very significant and is well worth the cost. Yard Signs will be part of our marketing strategy during 2006.

Internet Advertising

The Internet offers several highly efficient advertising opportunities to reach the exact audience that is most likely to use a Flat Fee MLS Listing Services. Internet online advertising will be a significant component of our marketing strategy during 2006.

Both Google and Yahoo have ‘Pay-for-Click’ advertising programs that are targeted to reach an audience based on search terms used. Each service allows a highly targeted message delivery based on geographic and search term criteria. Google has been more productive than Yahoo, but both are very cost effective methods of message delivery.

The Dallas Morning News has an online classified section devoted to real estate. NetOffer has contracted to have the top-of-page banner advertising position on the “Sellers’ page. This has proven to be a very cost efficient place to deliver a message to highly targeted prospective clients.

Newspaper Classified Advertising

During 2005 the Company placed a number of classified advertisements in the Dallas Morning News and found that the results were measurable. The use of the Dallas Morning News classified real estate section will be primarily limited to promoting specific properties and crafting those advertisements so that a powerful collateral benefit of visibility for our Flat Fee Listing Service is deliverd.

Radio Advertising

Radio can be a very effective method of delivering a message to a broad audience. The biggest problem with radio is that the cost of message delivery is relatively high in absolute dollars, even though the incremental cost per message delivered is very reasonable. Since radio is not a highly targeted delivery mechanism the message must have a high retention quotient. During 2005 we experimented with radio as an advertising tool and found that the results were very favorable, however, the response time was a lot longer than was initially expected. The message that we delivered did have high retention value and given sufficient time the return on investment was reasonable. Radio will be used very sparingly during 2006 due primarily to the high cost and the slow response time.

CLIENTS

Flat Fee MLS Listing Service

Individual Home Owners

Individual Home Owners represent the largest market segment. In the DFW area there are over 150,000 residential properties listed on the MLS system each of the last three years according to data compiled by the NTREIS. During 2005 the Company listed approximately 650 properties in the DFW area. During 2006 NetOffer expects to list a minimum of 1,000 properties, with an upside potential of 1,500 properties.

Investors

Investors are individuals who own real estate for either income production or capital appreciation purposes. Generally, these people purchase residential rental properties, residential distressed properties, or residential properties needing improvement. They are very cost conscious and they have their own networks of buyers and sellers, however, they often need to market properties outside of their network and when they do they seek the services of discount brokers and agents. These represent sources of recurring business. NetOffer has made good progress in building a reputation among Investors as a provider of MLS listing services.

Builders

Builders range from low volume private individuals who build only one or two homes a year to the large corporations that build many thousands of homes per year. Generally, builders on the smaller end of the scale build custom homes and builders on the volume end of the scale build homes on a speculative basis. Many builders do not maintain a staff of licensed real estate agents and use the services of local agents to list homes on the MLS when the sales are going slower than their need to dispose of inventory. There are many opportunities to develop business with volume builders due to the low cost and high efficiency of the NetOffer system. Additionally, as NetOffer develops a brand position and the attendant Internet traffic that goes with it many builders will desire to market their properties on NetOffer due to the volume of prospective buyers that NetOffer will attract. NetOffer has not gained a significant penetration of the Home Builder community and this represents a significant potential source of new business during 2006.

Advertising Services – Vendor Database Search Engine Listings

While not a significant contribution to 2005 revenue the potential for revenue from industry vendors is very significant. The Company has a well developed Vendor Listings Database that can be leveraged into potential revenue given sufficient critical mass to attract both Search Clients and Vendors wanting to be included in the Search Engine.

Affiliates – Technology Licensing in Major Markets

The Affiliate Technology Licensing Program is targeted to provide Brokers in other market areas with access to usage of the interactive database technology that NetOffer has developed to manage client information flow. Attractive potential clients for this technology are Brokers who are already engaged in providing Flat Fee MLS Listing services to their local market area and who want to upgrade their technology, their website, and their general business processes. There are at least 40 major market areas around the U.S. that can easily sustain an Affiliate relationship. As of January 31, 2006 NetOffer has signed license agreements with six (6) Affiliates. Projections are that a total of 20 Affiliates will be licensed by the end of 2006.

Hosted Accounts – Brokers and Agents within an Affiliate’s Market Area

Hosted Accounts represent a highly attractive potential source of revenue. As described elsewhere in this memorandum, there is a significant volume of need for the kind of coordinated, technical and aesthetic, upgrade to websites for the majority of Agents and Brokers in any given market area. The Hosted Account program represents a way to both generate revenue directly from providing advanced website technology for a low price along with extending the referral relationships of NetOffer into the local community to enable leveraging the many ‘lost’ referrals that could be converted into revenue.

MARKET POTENTIAL

Potential for Flat Fee Listings in the Dallas Fort Worth Area

The greater DFW area association of Realtors presents the following listing statistics:

Total Listings

• Year 2003 152,816

• Year 2004 159,088

• Year 2005 167,908

During 2005 NetOffer listed approximately 650 properties on the MLS system in the DFW area. This represents approximately .4% of the total listing volume. During 2006 projections indicate that NetOffer will list a minimum of 1,000 properties out of an estimated 160,000 minimum annual listings for the entire DFW area. The NetOffer share of DFW area listings should equal a minimum of .6%. The goal for NetOffer listings during 2006 is 1,500 listings that would equal to approximately 1% of the total for the DFW area.

1,000 to 1,500 listings is well within the capacity of the NetOffer staff and technical resources to handle without requiring any significant expansion in personnel or increasing other costs of operations.

Potential Affiliates for Technology Licensing

There are over 600 separate MLS systems across the United States. Most of those cover small communities and rural areas. The major metropolitan areas of the US where a significant mass of properties exist that could support a high volume Flat Fee Listing service would range between 40 and 60 depending on what level of market acceptance for the Flat Fee concept exists, and depending on the level of local regulatory acceptance of the Flat Fee model. Some states, such as Kentucky and Oklahoma, make it very difficulty for real estate agents to offer a Flat Fee service. Others, such as Texas and Florida, have little regulatory or legislative barriers to offering that model of service.

The Company believes that a total of 20 Affiliates can be identified and signed up by the end of 2006, and another 20 during 2007. Currently the Company has 6 Affiliates under license.

Potential Hosted Accounts in the DFW area

There are in excess of 15,000 members of the MetroTex Association of Realtors in the DFW area. There are approximately another 3,000 real estate agents and brokers who are not members of the MetroTex Association. The vast majority of these practitioners have websites that offer very little in the way of interactive functionality to assist with the management of their client’s information. NetOffer believes that there is a very large potential market for affordable, technically advanced, professional, customizable, template based, interactive real estate websites. Projections indicate that a conservative minimum of 40 Hosted Accounts can be sold in the DFW area by the end of the year and that they will generate a monthly minimum revenue in excess of $1700. The potential is easily double that amount.

Competition

Many Competitors

The Company and its Affiliates face many competitors in the markets that they serve. It is not possible to provide an exact count of the number of real estate agents and brokers that offer some form of discount service option, but the number is quite large. There are at least a dozen, and possibly more than two dozen, local agents or brokers that are actively pursuing a Flat Fee MLS Listing strategy. Most of these individuals charge between $295 and $495 for Flat Fee Listing services. NetOffer has taken the position of being the Value Leader which has been accomplished by maintaining the lowest price point in the market.

Increasingly Competitive Environment

As the trend toward discount listing services accelerates, it can only be assumed that the number of competitors offering such services will proliferate.

Low Natural Barrier to Entry

The barriers to entry are very low. Any person with a license as a real estate agent and with the permission of their Sponsoring Broker can offers discount-listing services. Since the underlying cost of providing such services is fixed the marginal income will attract a large number of prospective competitors. The cost of becoming a real estate agent is generally less than $1000. The annual cost of maintaining a license and of obtaining access to the MLS is generally less than $1000.

Referral and Hosting Competition is Fierce

There are many companies offering Flat Fee referrals via the Internet. The concept of attracting clients to a website, informing them of the benefits of a Flat Fee listing, and then distributing those clients to an ‘affiliate’ for a fee is well established. There are at least a dozen highly marketed Flat Fee Referral brokerages operating with a very highly visible search engine presence.

Companies offering website design and hosting services abound and many exist that specifically target the real estate practitioner. Quite a few of these are very well established and offer a very well marketed, feature rich, selection of design and technology options to the prospective client. The technology that NetOffer provides is equivalent to the finest currently available on the Internet, and the design options are modest or slim compared to existing competitors. The advantage that NetOffer will be able to present will be a combination of lower cost and referrals linked to the hosting relationship.

Competitive Strategy

Build a Barrier to Entry

The easiest way to establish a long term, high value business in the commodity space of Flat Fee MLS Listing Services is to add value to the service that cannot be easily duplicated by any competitor. This is essentially what eBay did with the auction service category.

Increase Value of Website

Since the MLS system is designed by REALTORS for the benefit of REALTORS, it does not allow its member REALTORS to place information in the system that will allow direct contact with the Seller. Listing a property of the MLS automatically includes a listing on and most local real estate brokerage company websites. In the DFW area, one simple listing on the MLS system automatically lists a property of well over 200 broker websites, in addition to . None of these websites will display the Seller’s name, phone number or email address to the public. The public must contact a REALTOR member of the MLS to obtain permission to view the property. The public cannot go directly to the Seller of the property.

Properties listed on are not under the same restriction. allows Sellers to display their contact information. By creating a significant level of traffic to and by encouraging Buyers to use to get directly in touch with Sellers can offer a high level of added value to the Flat Fee MLS Listing Service. All properties listed on the MLS by NetOffer will also be displayed on NetOffer’s website.

Since most customers of the Flat Fee MLS Listing Service use the service due to their motivation to save money on the sale of their property the potential to connect directly to a Buyer and save the Selling Agent (Buyer’s Agent) commission will be a powerful incentive to use NetOffer’s Flat Fee MLS Listing Service. If NetOffer can demonstrate a high level of traffic to the website the perceived value of using the NetOffer service will be elevated.

Low Cost Efficient Operations

As with all commodities, the Seller with the lowest price will always gain the largest market share. NetOffer will continue to expand on the branded position of offering Flat Fee MLS Listing Services for the low price of $99. The $99 listing is for 21 days. By offering Flat Fee MLS Listing Services for the starting price of $99 for 21 days NetOffer has established a strong brand position in the market as the most efficient, lowest cost provider of services.

As the lowest cost provider of services with the lowest price point in the market NetOffer has significantly reduced the selling time involved and will convert the selling process into more of an order taking process. By efficiently using the website to assist in the selling process NetOffer can convert the majority of Sellers into pre-sold customers such that by the time they actually contact NetOffer they will not require much in the way of professional contact.

By converting the selling process into an order taking process NetOffer will be able to reduce the need for highly paid, highly commissioned, real estate sales professionals. NetOffer will employ a small number of licensed real estate agents who will interact directly with the customer during the initial selling process. Once sold as much of the interaction with the client as possible will be shifted to para-professionals who will handle the data entry and document management processes.

Establish Market Dominance in DFW Market

NetOffer engaged in an aggressive mass marketing strategy during the Spring and Summer of 2005, that was designed to quickly establish a high level of brand awareness.

By establishing the most highly recognized Flat Fee Listing service brand in the DFW market NetOffer has effectively reduced the need to rely on expensive marketing to generate revenues. During 2006 the marketing expenditures will be designed to extend and support brand recognition.

Expand to other states during 2006 and 2007

Expansion to other states began via the Affiliate program when, during October 2005, NetOffer signed the first Affiliate in Phoenix Arizona. The Company has ongoing discussions with prospective new Affiliates in numerous market areas outside of Texas and should be able to establish an Affiliate network of 20 Affiliates by the end of 2006.

Expand Local Realtor Network during 2006 and 2007

The Hosted Accounts for both Brokers and Agents will be the initiative through which NetOffer will extend relationships with other local Brokers and Agents and will allow NetOffer to offload referrals that are not currently within our serviceable area. In addition to hosting revenues these relationships will allow NetOffer to receive referral fees from the Agents and Brokers that also execute a Referral Agreement with NetOffer.

Risk Factors

The securities offered herein involve a high level of risk. Any person contemplating an investment in the securities offered herein should be aware of the risk factors of any investment and should consider, among others, those factors set forth below.

Early Stage Development Company. As an early stage development company, the Company has limited operating history and the market for services offered by the company has not proven sufficient scalable to provide a return to investors. The Company has a limited history in demonstrating the ability to generate client revenues, or the ability to generate repeat business, from the intended market. Because of these factors, it is difficult to evaluate the Company’s prospects, and its future success is more uncertain than if the Company had a longer or more proven history of operations.

Offering Price Arbitrarily Established. The offering price of the Company’s shares has been arbitrarily determined by the Director and bears no relationship to book value.

No Audit of Books. The books and records of the Company have not been review or audited by an independent auditing firm. The books and records presented herein are the representation of management and should be carefully considered prior to any investment.

No Independent Board of Directors. The Company does not currently have a Board of Directors to act as a counterbalance to the President and Majority Shareholder. There is no group that is specifically assigned the responsibility for looking out for the best interests of the Shareholders and to provide a voice for the Shareholders if the President desires to take an action that is potentially detrimental to the interests of those Shareholders.

No Present Market for Stock. There is no present market for the Company’s shares and

probably no market for the shares will develop within the near future. Accordingly, purchasers may encounter difficulty in selling the shares purchased through this offering. In fact, there may never be any market for the shares offered herein.

Length of the Offering. NetOffer will hold this offering open until March 31, 2006, with the option of extending the offering for an additional 120 days at the discretion of Management.

Use of Proceeds Not Determined. The use of the proceeds of this offering has not been

determined with exactness; only estimates have been made. (See “Use of Proceeds”)

Limited Transferability of Shares. This offering is made pursuant to an exemption from

registration under the Securities Act of 1933 and state securities laws. No shares may be offered, sold, pledged, or otherwise disposed of without compliance with the Operating Agreement and with applicable laws or an exemption from registration of the shares.

Inability to Raise Additional Capital. If NetOffer needs to raise more money to continue research, product development, and operations, the Company may seek additional funds from banks or other commercial lenders, from another private placement similar to this offering, from venture capital funds, or if market conditions permit, from a public offering, collaborations and licenses, and or loans from various sources. Additional capital may not be available on terms acceptable to NetOffer, or at all. Any additional equity financing may dilute shares, and debt financing, if available, may include restrictive covenants. If money cannot be raised when needed, the Company may have to reduce its capital expenditures or scale back development of products and services or cease operations entirely. The Company expects that current resources, together with the proceeds from this offering, and earnings from operations will be sufficient to fund operations, but there is no assurance as to the sufficiency of funds raised under this offering in achieving long term operational sustainability.

Dependence on Key Suppliers. NetOffer uses the services of Nathan Huber to develop the software on which the company depends. The Company has taken steps to insure that the software code is capable of being managed by other individuals in the event that Mr. Huber is unable or unwilling to continue to manage and maintain the software. The software is written in PHP and the ‘system’ runs on a ‘free’ LINUX based operating system. The hardware on which the system and software run is owned by NetOffer and the hardware is hosted in a CI Host commercial hosting facility with rack space leased by NetOffer. In the event that Mr. Huber is not able or willing to manage the hardware and software other individuals with similar skills would be able to be found to take over this critical function, however, there is the potential that a transition from Mr. Huber to another service provider would involve some level of disruption to service.

Emergence of New Technologies. The Company operates in a technological environment that is constantly changing and in which new technologies are constantly arising. It is possible that some unforeseen new technology could emerge that presents a challenge to the ability of the Company to compete effectively. The Company has limited, finite resources in terms of both money and personnel with which to research and prepare for such technological changes to the structural environment in which the Company competes. Such a technological change, should it occur may have a material adverse effect on the Company.

Emergence of New Competitors. The market in which the Company operates is filled with many competitors and is a highly fragmented market. It is possible that new competitors with better capital funding and personnel resources will enter the market(s) where the Company operates. If such occurs the increase in competition may have material adverse effects on the cash flow and ability of the Company to compete effectively.

Competitive Response to Marketing Strategy. There are many competitors confronting the Company and many of those competitors have significant funding, personnel, and client relationships. The ability of these competitors to develop effective counter-strategies to those developed by the Company is a significant concern and the ability of the Company to effectively address such competitive responses is not known. If the Company is not able to develop an effective strategic response to changing competitor strategies material adverse consequences may be experienced by the Company.

Legislative Changes May Endanger the Business of the Company. It is conceivable that legislative changes may be enacted that significantly, negatively, limit the ability of the Company to due business under the currently anticipated business model and there is no assurance that the Company will be able to successfully adapt to such a change. There is a very real risk that legislative changes could cause the Company to become insolvent and have to terminate operations without any significant assets to return to shareholders.

Limited Management Resources. The Company has not proven the ability to recruit or develop management talent that will be required to support the aggressive expansion plans that have been presented herein. Former experience in building a large company does not insure that current and future management recruiting and development skills will be sufficient to insure the success of this particular business. The inability to recruit or develop capable management skills and resources can cause the company to fail or to otherwise not be able to realize a return on investment for the shareholders.

Concentration of Management Authority. The Company does not have a Board of Directors that has any significant power of the primary shareholder. Lack of a powerful Board of Directors means that the decisions of Management may not have any effective oversight or cautionary influence. If the primary shareholder, who is also the President and CEO and Chairman of the Company does not have any constraints placed on his actions by a Board of Directors there may not be any secondary or unbiased party to watch out for the best interests of the shareholders.

No Minimum Capital Subscription Required. The Company does not have a minimum amount of capital that it is required to raise in this offering to accept subscriptions hereto. It is possible that the Company will not raise enough capital to fund the operations as presented in this offering and that failure to raise sufficient capital to achieve the marketing goals set forth herein may have serious negative consequences on the success of the Company.

Insurance, Client Liability, and Potential Litigation. The Company may employ Agents or other employees that expose the Company to liability during their interaction with Clients of the Company during the course of the performance of the business of the Company. While the Company has insurance to cover such events, there is no guarantee that the insurance will be sufficient to cover the claims made by plaintiffs to such litigation and failure to successfully defend against such claims may jeopardize the future of the Company. Further, competitors may attempt to sue the Company as part of a general strategy to place the Company under management and financial stress as part of their competitive strategy to counteract the strategy of the Company. Such suits, if they occur, have the potential to jeopardize the future success of the Company and to drain both management and financial resources.

Risky Investment

This is a risky investment and only those investors who can afford to lose their investment should consider investing herein. While management believes that the potential for success is high the risk is also quite high and no one should invest in the common stock of NetOffer who can not afford to loose their full investment.

DESCRIPTION OF SECURITIES AND THE OFFERING PRICE

The securities offered herein are shares of common stock in NetOffer, Inc. When issued all shares will be fully paid for and non-assessable. Each share will be entitled to one vote at annual shareholder’s meetings and is equal to each other share with respect to voting rights, liquidation rights, and distribution rights.

The maximum number of shares offered in this memorandum is 500,000 with a par value of $.001 per share. The offering price of each share is $0.06. There is no requirement to sell a minimum number of shares. The maximum number of shares issued will be 500,000 shares. If the maximum number of shares are sold the amount raised from the offering will be $30,000.

The following table shows the effect of shares issued under this offering on ownership assuming full subscription and full dilution.

  |  |  |  |  |This |  |  | |  |Prior to |  |This |This |Offering |After |  | |  |This Offering |Percent |Offering |Offering |Percent |This Offering |Percent | |  |Shares |% |$ |Shares |% |Shares |% | |Current Shareholders | |  | | |  | |  | | Elrond |3,888,035 |.5079 |0 |0 |0.000 |3,888,035 |.4767 | | Bilbo |2,000,000 |.2618 |0 |0 |0.000 |2,000,000 |.2457 | | Gandalf |300,000 |.0393 |0 |0 |0.000 |300,000 |.0369 | | Erendil |247,817 |.0324 |0 |0 |0.000 |247,817 |.0304 | | Gimli |150,000 |.0196 |0 |0 |0.000 |150,000 |.0184 | | Frodo |100,000 |.0131 |0 |0 |0.000 |100,000 |.0123 | | Nazgul |83,333 |.0109 |0 |0 |0.000 |83,333 |.0102 | | Solomon |83,333 |.0109 |0 |0 |0.000 |83,333 |.0102 | | Leonitus |83,333 |.0190 |0 |0 |0.000 |83,333 |.0102 | | Erendor |66,667 |.0087 |0 |0 |0.000 |66,667 |.0082 | | Ranger |50,000 |.0065 |0 |0 |0.000 |50,000 |.0061 | | All Other Shareholders |595,002 |.0779 |0 |0 |0.000 |595,002 |.0731 | |Total Initial Shareholders |7,639,840 |1.0000 |0 |0 |0.000 |7,639,840 |.9386 | |New Investors in This Offering |0 |0.000 |30,000 |500,000 |1.000 |500,000 |.0614 | |$ per Share of New Offering | |  |.06 | |  | |  | |Total Shareholders |7,639,840 |1.0000 |30,000 |500,000 |1.000 |8,139,840 |1.000 | |

Distribution of Income

The Director(s) may at any time distribute to the shareholders cash or payments in kind in an amount that the Directors determine, in their sole discretion, is not needed for the operations or the business of the Company.

The Company expects to retain net income to fund the anticipated growth of the Company. There is no guarantee that the Company will earn any income or make any distributions.

Liquidation Rights

Upon any sale, transfer, liquidation, dissolution, or winding up of the Company, holders of shares are entitled to receive pro rata their portion of the assets of the Company available for distribution after the repayment of any debts or obligations.

USE OF PROCEEDS

The net proceeds from this offering are planned to be used to accomplish the following:

Debt Reduction

The Company will use up to $20,000 of the proceeds to reduce short term liabilities.

Operations, Working Capital, and Contingencies

Funds will also be used to cover general working capital needs and unanticipated contingencies.

Capital Equipment

There are no significant capital expenditures currently anticipated to occur in the near future, unless existing equipment suffers a catastrophic failure.

OFFICERS AND DIRECTORS

Officers of the Company

CEO, President, Director – Lee Thurburn (52)

Mr. Thurburn has been the President of NetOffer, Inc. since its formal organization in March of 2002.

Mr. Thurburn attended the University of Texas at Arlington where he received a B.B.A. in Accounting in 1982 and a M.B.A. in International Business in 1992. Mr. Thurburn founded FlashNet Communications, Inc. (an Internet Service Provider) in 1995. By early 1999, FlashNet had grown to over 250,000 customers with a staff of approximately 400 employees. On March 16, 1999, FlashNet Communications successfully completed an IPO on the (NASDAQ:"FLAS"). In October of 1999, FlashNet was acquired by Prodigy Communications.

Mr. Thurburn started his professional career working for Arthur Andersen & Co. in 1981. In 1983, Mr. Thurburn went to work with a small CPA firm in N. Dallas. In January 1984, Mr. Thurburn established a bookkeeping company that became a CPA firm later in 1984. Mr. Thurburn sold his interest in the CPA firm to his partner in 1986 and entered the medical industry as the Executive Director of a small group of optometrists in the Ft. Worth, TX area. Mr. Thurburn worked with Optometrists and Ophthalmologists in various consulting capacities from 1986 through 1989. During this time Mr. Thurburn researched and wrote the book "Modern Optometry for the 90's: A Practice Management Guide" which sold over 5,000 copies and was used as a textbook at several colleges of optometry in the US.

In 1990, Mr. Thurburn returned to UT Arlington to earn a Masters in International Business. Upon graduation in 1992 Mr. Thurburn wrote the book "Mexico: The New Land of Opportunity" which ultimately sold over 5,000 copies. In July of 1995, Mr. Thurburn began the business that was to evolve into FlashNet.

Vice President - David Lewis, Jr., Broker (38)

Mr. Lewis has been involved in the real estate industry since 1990. Mr. Lewis first obtained a license in the state of Oregon in 1993, and he obtained his initial Texas Real Estate license in May of 1999 and his Texas Brokers license in January of 2003. Mr. Lewis organized DSL Properties, LLC in 1999 and has been the President since inception. DSL Properties, LLC became a Real Estate Brokerage in 2003 when Mr. Lewis became a Texas Real Estate Broker. Mr. Lewis has substantial direct personal experience in both Residential and Commercial real estate transactions and currently sponsors over 70 licensed real estate agents through DSL Properties, LLC. Since 2000, Mr. Lewis has sole over 22 million in gross property value.

Directors of the Company

Lee Thurburn – Sole Director

Currently Mr. Thurburn is the sole Director. Other Directors may be added, possibly from those investors who participate in this offering, or from outside the Company, as and if appropriate.

Additional Directors

Additional Directors may be added to the Company as suitable individuals are identified. All Directors will be required to have a direct personal investment in the Company and Directors will be selected based on their ability to provide strategic guidance to the Company. Directors will be sought with significant expertise in the areas of: real estate sales and management, finance, construction, marketing, management, legal, political and legislative issues, and technology fields.

EXECUTIVE COMPENSATION

Mr. Thurburn will receive a salary commensurate with his level of experience and his ability to grow the value of the Company to its shareholders. The salary for Mr. Thurburn is set at $x,000 per month through the end of 2006. Mr. Thurburn will have a maximum annual increase in salary of 12% during 2007 and 2008. Mr. Thurburn will receive stock equivalent to $x,000 per month of additional income. The number of shares that will be allocated will be based on a per share cost of the greater of $.06 or the cost of shares sold in the most recent Private Placement Memorandum precedent to the issuance of the shares to Mr. Thurburn.

Mr. Lewis receives a monthly rent of $1,700 for space leased by the Company and also provides his services as the Sponsoring Broker of NetOffer, Inc.

CASH FLOW PROJECTON ASSUMPTIONS

(see attached spreadsheet)

Discussion

Projecting revenues and expenses for an early stage venture is highly subjective and very difficult to do with any degree of certainty. While reviewing the attached spreadsheet, it is very important to keep in mind that basic assumptions about the interaction of revenues and expenses may prove to be wrong.

The most critical aspect of projecting future revenues is the ability to accurately predict the response of prospective clients to the marketing messages of the Company. The number of Clients that will be attracted with any given marketing message and level of media expenditure is extremely difficult to predict in advance. This is even more true when the base of experience used to predict is limited to a single annual cycle as is the case with these projections.

Predicting cash flow becomes progressively more difficult the farther out into the future you attempt to look. Variables such as changing competitive and legislative conditions are nearly impossible to predict. If the Company is successful in achieving its goals, the Company will embark on expansion and may determine that raising additional capital is required. None of those issues are dealt with in the attached projections.

Detailed Explanation

The projections are broken into the following sections, which feed into the Summary page:

• Summary Page

• Revenue Projections – includes Summary from Affiliates and Hosted detail pages

• Cost of Goods Sold

• Expenses – includes Summary of Fees/Dues & Payroll from detail pages

• Payroll – detail pages supporting Summary shown in Expenses

• Fees & Dues – detail pages supporting Summary shown in Expenses

• Affiliate Revenue – detail pages supporting Summary shown on Revenue Projection

• Hosted Accounts – detail pages supporting Summary shown on Revenue Projection

Revenue Projections

Total Affiliate Fees and Total Hosted Account Fees detail can be found on the appropriate detail spreadsheet described later. Consulting Services are primarily related to the earning of commissions by Agents who work with Buyers and successfully facilitate the purchase of a home thereby earning a commission. The Listings section provides a detailed breakdown of the expected listings by Package and Service category. The Builders section shows the main Builders with which the Company currently has some existing relationship. The Online Advertisers section shows generalized projected revenues from advertisers in the Vendor Database portion of the system.

Cost of Goods Sold

The Agents Commissions line is shown as 80% of the combination of the Total Consulting Services and the Listing Package E amounts from the Revenue Projections page. This is because all of those revenues will be generated by Independent Agents earning 80% of the commissionable income that they generate.

The other expense line items are self explanatory.

Expenses

Total Dues Fees and Subscriptions, along with Total Payroll, are summary lines brought from the detail pages presented later in the group. Otherwise, each expenditure line item is self explanatory.

Payroll

Salaries for Lee Thurburn are shown capped at $x,000 per month through the end of 2006. There will be an increase of approximately 10% starting in January 2007. Administrative Assistant expenses are shown in correlation to the increased need and expense as listing volume increases and additional expenditures for this position will be encountered to assist with the increase in listing volume. PR Taxes are shown at the anticipated charges relative to payroll expense.

Fees & Dues

These expense line items are self explanatory.

Affiliates Revenue

Are shown broken down into their fixed monthly and variable monthly amounts. The fixed monthly amounts are very predictable based on contractual obligations. The variable monthly amount is a projection of anticipated revenues based on current knowledge of the marketing methods being employed by the individual Affiliate.

Hosted Account Revenue

These revenues are the most speculative since as of the time of the preparation of these projections no actual Hosted Accounts have been sold. Anecdotal research has been used to develop these projections.

2005 FINANCIAL STATEMENTS

Balance Sheet (attached)

Income Statement (attached)

SUBSCRIPTION DOCUMENTS

Subscription Agreement (attached)

Shareholder Agreement (attached)

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download